Dealing With Unexpected Expenses

Your annual life insurance premium is due. You need eye glasses. You owe money for income taxes. Your child needs football cleats. Unexpected or irregular expenses can throw a wrench into your budget. And once you pay the unexpected expense, you may find that you don't have enough money for all your other more predictable, monthly expenses.

Chances are that this is not the first time that you have been hit with an unexpected expense. And that’s the key – while unexpected expenses surprise you in the moment, they happen all the time. Insurance bills, holidays, back-to-school expenses, and car repairs happen. When they happen or how much they cost may not be completely predictable, but you know they will occur. By doing some planning and budgeting, you can change unexpected expenses to anticipated expenses in your budget. Then they won’t become emergencies.

Tools to Help

Budgeting for unexpected expenses

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What You Can Do Right Now

Information is great. But taking small steps now can lead to big changes.

Today
Make “unexpected expenses” a part of your budget.
Collect receipts for last year's expenses. Highlight expenses that don't happen every month. This list is the beginning of your “unexpected expenses” budget.
Next Week
Once you have identified your past “unexpected expenses,” estimate their costs and timing. This will give you an amount per month that you should save.
During the Next Few Months
Start saving the monthy amount you identifed in your budget review.
Recognize that basing future expenses on past expenses only provides savings guidelines. But, this method may keep an unexpected expense from becoming an emergency.

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