Six Unexpected Expenses You Need to Be Prepared For
Everyone has experienced times when expenses all come at once. Even if you budget and save, you can still be knocked sideways by unexpected expenses. While you may not be able to predict when unexpected expenses may occur, it is possible to at least know what types of unexpected expenses are most likely to occur. If you are prepared for the unexpected, you do not have to desperately wait for your next paycheck to come through or max out your credit cards when unexpected costs start ganging up on you.
There are multiple types of unexpected financial emergencies to prepare for. When unexpected emergencies are first brought up, most people imagine the most expensive prospects, such as sudden medical payments.
However, there are smaller emergency costs to prepare for as well, such as something in your home breaking down or needing to replace a tire on your car. Since there are so many potential financial emergencies, it is important to focus on the six most common emergencies. Once you know how to deal with these basic emergencies, you can apply this knowledge to other unexpected financial expenses.
1. Medical Emergencies
Medical emergencies are one of the most serious unexpected expenses; both from the price and the impact the emergencies have on your wellbeing. When medical emergencies occur, you cannot put off dealing with them. Your health, and your family’s health, must be a top priority. By making sure you have adequate health insurance or by investing in a medical emergency fund, you can be prepared to cover expenses when they arise.
Getting a health savings account is a good idea. This is an account used solely for medical purposes. Health saving accounts are entirely tax-free. A major advantage of a health savings account is the money rolls over from one year to the next, so you can see your savings build up over time.
2. Home Repair Costs
Home repairs are often costly. Your boiler could break, your roof could leak, your oven could stop working or you could have an infestation of termites. All sorts of problems can happen in the home suddenly, meaning you have to somehow find the extra money to cover the costs of repair. The more you can put money aside for these sorts of eventualities, the better.
The costs ultimately vary depending on what breaks and how severe the damage was to cause the break. You may need to replace something in your house outright or only purchase a single part to get things working again.
Home repairs are not limited to your home, but also the property you own. If your driveway is damaged, you need to quickly make repairs to avoid damaging your car, which can lead to separate expenses. If you are unable to spend the money on home repairs quickly enough, it is common for the damages to grow out of hand and cause additional issues around your house, creating a snowball effect where you are constantly spending money to correct issues stemming from one source.
3. Car Repair Costs
As with houses, cars can break down when you least expect it. All manner of problems can arise with your car over time. To avoid these expenses, you must perform regular maintenance on your car to ensure it is running to its best ability. Even with such regular checks, problems can arise to leave you out of pocket.
When setting aside money for car repairs, factor in how much it costs to rent a car for a few days. Depending on the severity of repairs, your car may end up in the shop and if you are unable to get to work every day you risk falling further into debt.
Traffic tickets are also a potential risk. You may think you are an excellent driver and abide by all the rules of the road but, sometimes, traffic tickets hit even the best drivers. These can cost hundreds of dollars, so you need to be prepared to pay for one in addition to your other car costs.
Keep in mind that if you have an auto loan on your vehicle, you will still be responsible for making your monthly payments even if you are unable to drive it. Failure to make payments on time will result in negative marks on your credit report.
4. Losing Your Job
No one likes to think about it, but you could lose your job unexpectedly. Whether this is due to a national financial crisis or your company becoming bankrupt, losing your job is a potential reality you cannot afford to overlook. If you suddenly lose your job, do you have enough in your savings to get you and your family through the time of crisis?
Your job loss does not need to be permanent to count as an emergency. If you have a period when you are too sick to work or a week where your work hours are drastically cut, it helps you stay afloat to fall back on your emergency job funds.
5. Pet Expenses
If you have pets, you know they can be expensive to look after. Major medical treatments can come unexpectedly and they can cost a lot. Every responsible pet owner needs to have the funds in place for when such instances arise. Obtaining pet insurance or putting money aside in an emergency-funds account can make sure your pet is looked after.
6. Utility Costs
You may be good at budgeting for your utility bills, but you need to be prepared for those costs to go up. In some areas of the country, utility bills are skyrocketing without warning.
As well as an increase in prices from utility companies, utility bills for heating always go up and down depending on how many cold or hot months are in the weather cycle. An easy way to save for these seasonal increases is to budget for the average cost and set aside funds during the less expensive months.
How to Set up an Emergency Fund
Whatever the unexpected expense is, the best way of preparing for it is to have an emergency fund in place. It needs to be fairly liquid and cover about three to six months’ worth of living expenses. It is a good idea to set up several savings accounts for different potential unexpected expenses, as opposed to having one savings account you may find yourself raiding often.
If you are single, it makes sense to build up the funds even more. Having emergency funds up to one year’s worth of living expenses is advised for single people. This eases the situation dramatically when you find yourself unemployed or you are facing an unexpected illness or hefty repair bills.
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