Planning for the Unexpected

Planning for the unexpected is sort of an oxymoron. How can you plan for something you do not expect to happen? Well, there are ways to make this work in any budget. Check out these tips on planning for “unexpected” expenses.

First, think of your most recent unexpected expense. Maybe it was a home appliance breaking down, a medical procedure, or a vehicle repair. Really think about these expenses. In reality, these types of expenses are not unexpected. Instead, we should call them inevitable. These things happen. Car tires blow out. Refrigerators stop working. Cars need regular maintenance. Healthcare is not free.

Instead of having these situations arise and using debt to cover them, it is possible to change your budget style and plan for them. In order to break the cycle, we recommend saving an emergency fund as fast as possible. Get a minimum of $500 saved in that emergency fund, $1000 is better. Once that happens, you can start working on revamping your budget.

Write the Budget

The first step is to write out your budget. This is a list of all expenses, in and out, and a way to track expenses from month to month. Once the basic, regular bills are in the budget, you can start to create line items for the inevitable expenses.

Fund the Buckets

After the budget has been written, you can start to fund “unexpected” or inevitable areas of the budget. There should be a line item for medical expenses. If you’re like my family, we rarely use this account, only occasionally going to the doctor’s office. When the time comes for a larger expense, like purchasing eyeglasses or the annual eye exam, there is money in the account to do so.

Another line item should be for vehicle maintenance and repairs. Again, this is an inevitable expense in every budget. Cars need oil changes, new brakes, new tires, etc. Fund the vehicle bucket, and there will be money in the account when a bigger repair comes up.

Continue on through the budget for each area, whatever you and your family may need. We have “buckets” for healthcare, vehicles, housing, “incidentals” (this is for any taxes, large donations, gifts, etc).

USE the Buckets

The last step is to actually utilize the buckets. Old habits die hard. Not if but WHEN a situation arises, don’t reach for the credit card, the personal loan, etc. Use the money you have funded. If there is not enough in the account, you can use the emergency fund. But replace the fund as soon as possible.

By creating and using the areas of the budget, you will find yourself being proactive with finances. You will be more productive with your finances, and you may find yourself more capable of handling potential crises.

What is the biggest “unexpected” expense you’ve had to deal with? What is your favorite method for addressing them? Let us know in the comments.