Don’t Be Caught off Guard: How to Budget for Unexpected Expenses Next Year

Unexpected expenses are inevitable in our lives. However, there are a few tips for staying prepared for these expenses.

If you don’t plan for unexpected expenses, when they arise, they can throw your finances off track.

Therefore, it is prudent to get ready for unexpected expenses to avoid landing in tricky financial situations.

Identify Sudden Expenses

The first thing is identifying unexpected expenses in order to budget for them.

Make a list of common sudden expenses such as medical expenses, house insurance, massive car repairs, home repairs, vision bills, and property taxes, to mention just a few.

Once you identify common unexpected expenses, they cease being unexpected, and you can plan for them accordingly.

Estimate Cost of Settling Unexpected Expenses

You can make an educated guess of overall annual unexpected expenses. For instance, when budgeting for car repairs, refer to the previous year’s car maintenance costs.

Additionally, you need to think of home repairs. The roof and the plumbing system are more prone to damages.

You can enquire about the cost of hiring professional roofers and include it in your emergence budget.

When it comes to your family medical expenses, think about what you spent at the hospital the entire previous year.

This way, you will be in a better position when the unexpected happens in the new year.

Create an Emergency Fund

Although you can’t wish yourself bad luck, eventualities do happen. Creating an emergency fund helps you to prepare for the unexpected ahead of time; hence they can’t hurt your finances.

Experts recommend having money that can sustain you for 3 to 6 months in your emergency account in case you lose your source of income.

Creating an emergency fund is a brilliant way of setting money aside for the unexpected.

Normalize Saving

Setting up an emergency fund is not enough. In fact, setting money aside for the unexpected is easier said than done.

Although the emergency fund is meant to settle expenses, sometimes bills pop up, and you end up eating into your fund.

Saving every month can help prevent eating into your emergency fund when you need to cater for minor costs.

Set up a fixed savings account and set reminders to ensure you don’t forget to save.

Add Extra Expenses Into Your Budget

In the year ahead, you should prioritize adding common expenses into your budget.

You can do this by incorporating extra expenses rather than budgeting for the exact amount.

The extra money can sort small expenses such as hiring a roofer to clean your gutters.

Unexpected bills will always be there in life. Therefore, it is imperative to prepare for them.

Tags: Budget, Emergency Fund, Unexpected Expenses

Category: Family Finances