Life happens, and no matter how well you plan it, some unexpected things are bound to happen. These unpalatable events can wreck our budget and make a huge dent in our pockets. Events like medical emergencies, fires, parking tickets, bad weather and the like come without warning. That is just the way the universe works, so there is no use beating yourself up over something you cannot control. Instead, roll with life’s punches and face them head on by planning for the unexpected and, well, “expecting” them to actually happen. Planning for these emergency expenses is not courting disaster. Saving for a possible rainy day is a smart decision. Here’s how you can do it:
Have an Emergency Fund or Savings Account
Every working person gets a paycheck consistently, whether it’s weekly, bi-monthly, or monthly. It is imperative to take out funds from each pay cycle and then set it aside for unforeseen expenditures. Brice Capital, which is a reputable debt consolidation company, suggested keeping these funds in a separate account so that you will not be tempted to dip your hands and spend them. These are sometimes called “rainy day funds” or “pad savings” for moments wherein you need to pad your income because of a rainy day. The rule of thumb is to save enough to last you 6 months in case you suddenly lose your job. Six months’ worth of saved money to cover your usual expenses is critical to have, so you can pay your mortgage and buy your needs even if you don’t have work. This timeframe also gives you ample time to find a new source of income. Having this leverage will give you some measure of peace during a deep financial crisis. Periods of uncertainty may come, but you can help keep your fate certain by having this cushion of protection.
List All Your Possible Overlooked Expenses
Sometimes, unexpected expenses are really just overlooked expenses. Brice Capital, an industry expert in debt consolidation, noted that the majority of the people who come to them for debt financing cited overlooked expenses as the primary reason for their massive debts. It is important to reevaluate your life and double check to see if there are other expenses that you’re just unable to fit into your family’s monthly budget. To illustrate, consider each of the following:
Home Needs: This includes quarterly bills, property taxes, pest control, appliance repair or replacement, and general maintenance, which is part and parcel of owning a home.
• Health Concerns: Everyone becomes sick so it is essential to include things like braces, eyeglasses, contact lenses, and the like as regular expense, so you won’t be surprised when you need them.
• Kids Stuff: Children have field trips, outgrow clothes, attend parties, need school materials, and have extracurricular activities. Every single detail must be factored into the budget.
• Car Expenses: All vehicles need upkeep and maintenance. Oil needs changing and tires need realignment. Factor in possible traffic violation penalties, toll fees, and annual registrations. These are all standard car expenditures that are often overlooked.
• Seasonal Spending: As the name implies, these typically happen because of season changes. Vacations, Christmas Gifts, Thanksgiving planning and the like can add up and ruin your savings plan.
Build Forgotten Expenses Back into Your Budget
Typically, people have bills that come monthly like utilities, cell phone, credit card, mortgage and the like. However, there are major payments that come yearly like home insurance and taxes. If these have been overlooked, build them back into your budget. Sometimes, you can split these rare costs with your future budget by planning for them far in advance. Setting things up like this will keep the money safe in your emergency fund account. Accessing them too often will deplete the amount, making withdrawals impossible when you really need them. Brice Capital would like to remind everyone that some banks have a withdrawal limit, so keep that in mind, too.
Set Up a Sinking Fund
Is a sinking fund a good idea? The last thing you need is for your finances to sink into an all-time low. Brice Capital explained that a sinking fund allows you to sink in money slowly to an account. This method of saving is usually reserved for case specific items. For instance, you want to go on a family vacation to Europe that costs $6,000. You can decide to save $250 dollars a month for the next two years to save up for your dream vacation. There’s no need to go into debt for non-essential items.
Curb Non-Essential Spending
In times of deep crisis, hold off on unnecessary spending. You can learn to lay off the unnecessary expenses before the crisis hits, so you’ll have an even bigger emergency fund to fall back on. Learn to say no to people, including your kids who are always demanding the latest toys that they don’t even need. If your co-workers invite you to Starbucks daily, then consider cutting off that designer coffee habit. A $5 large ice cappuccino equates to almost a $150 a month. Regular brewed coffee that you brew in your own house costs less than a dollar. Resist the draw of eating out because home cooked meals are so much cheaper and healthier for you. Spend your hard-earned money wisely so that you’ll have something to grab onto when life calls for it.
Increase Your Emergency Fund
Aside from curbing spending, there are many ways to build your emergency fund. You can opt to pick up more shifts at work to increase the size of your paycheck. If possible, pick the night shift, because you often get paid more with night differential, even if you put in the same number of hours. You can also engage in a side hustle like babysitting, selling cakes and the like. Best of all, you can let your money work for you by investing it.
Get Financial Aid
Unfortunately, even the best laid plans can go haywire. When you feel as if your budget has been stretched to its absolute limit, there is no shame in seeking a lifeline. Brice Capital suggests getting a short-term money loan with a trusted financial house that provides private funding. Choose the one with the most generous terms and competitive interest rates.
Know Who to Call
Sometimes, unauthorized expenses can register on your checking account or credit card. How it got there is one thing but knowing how to correct it is more important. To avoid the stress and panic that these situations often bring, know who to call when they arise. For instance, save the number of your bank in case you get notified about a purchase that you were unaware of and did not authorize. Doing so corrects the issue and minimizes any financial damages. The same applies if you get into a car accident. Make sure you have the number of your car’s insurance company to resolve the problem and guarantee coverage.
There is no shame in asking for help, even from relatives, as you struggle to find your financial footing once again. Unexpected occurrences will rear their ugly head from time to time, but you have the power to fight back so it won’t derail your life.
