If there's one thing in life that's certain, it's that plans often change. Your idea of a perfect vacation could go south with an unexpected illness, a broken down vehicle, or even the theft of some belongings. What was supposed to be a quiet winter season can turn stressful when the furnace breaks, or there's a sudden leak in the roof.
The common thread running through all of these events is money. When the unexpected occurs, it's usually not in the form of a winning lottery ticket. No, instead you unexpectedly find yourself parting with money. Here's what you need to know about unexpected expenses and a few tips on getting a good preparation plan in place.
What isn't an Unexpected Expense
The very definition of an unexpected expense is the thing that seems to get far too many people in financial difficulty. The general idea is that if you could have reasonably expected the bill or the expense, it's not really "unexpected." So, your property taxes and insurance premiums that come due every year shouldn't be a surprise. These are things that should be part of your household budget.
Also, charges to change the oil in your car, occasionally go to the doctor, and do minor repairs on your home should be in your budget. Finally, if you're a homeowner, you know that the roof will need replacing at a certain point as will the HVAC system. Again, these are budget items.
What is an Unexpected Expense?
Unexpected expenses are things that you couldn't have reasonably predicted, which are outside the norm of everyday living. Let's say that the car breakdown we mentioned at the beginning turns into something catastrophic, such as a transmission failure. Most people don't anticipate something like this.
Other examples include losing your job or getting diagnosed with a major health issue that is going to require treatment, travel, or other costs that fall outside your medical insurance. When these kinds of expenses hit, hopefully, you've planned in advance.
Preparing for Unexpected Expenses
In addition to a household budget, the best way to prepare for unexpected expenses is to save! If you currently do not have any savings, you're not alone. According to one survey, nearly one-third of Americans have no savings. This means that they have no real means to handle unexpected expenses.
If you're ready to get better prepared for the unexpected, take a look at your history and see what expenses have hit you in the past that have caused a hardship. Go back through your banking and financial records for several years to grab this data. If they're predictable expenses, start putting them into your monthly budget. If they're truly unexpected and genuine shockers, add them up on an annual basis and see what you need to start saving each month to create a safety net for you and your family.
Once you have that safety net figure, go back and review your household budget and see if there is any way that you can increase your savings even more each pay period. You might have a good start with a savings figure with your past numbers, but no one can predict what the future holds. If you're worried about something like a job loss, you should accumulate as much as six months worth of your monthly expenses in your savings fund.
Budgeting and savings might be chores, but it's worthwhile and will pay off when you need it most.
Knowledge is power. The more you know, the easier it is to make an intelligent choice. Everyday life, as well as certain events and circumstances, require you to make choices. And peace of mind is gained when you feel good about the decisions you make.
When it comes to life insurance, IntelliQuote is there for you to make the intelligent, well-informed choice. From term life insurance to universal life insurance and final expense insurance, we make it easy for you to compare, shop and save.
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