Budgeting. Everyone’s favorite pastime, right? The good news is that planning for housing, food and other monthly expenses gets easier over time. The more you know what costs you can expect, the better you can plan for them.
But not all expenses are quite so predictable. Unexpected emergencies can blow a hole in your budget. At some point you’ll have to contend with a major home fix, a car repair or a medical emergency — but none of these things has to spell financial ruin.
Here are three unexpected expenses to expect and some money management tips to help you plan for them more effectively.
Though car repairs and maintenance can themselves be somewhat predictable, the cost of these things can come as an unhappy surprise. Car problems also tend to get worse — and more expensive — the longer you leave them untreated. So if you can’t afford to fix your car now, you’re probably setting yourself up for an even bigger bill in six months.
That said, auto maintenance and repair needs are frequent enough that you might consider building a line item into your monthly budget dedicated to these costs. If you don’t need the funds that month, hold on to them for when you do. Bringing your car in for regularly scheduled maintenance like oil changes are tire rotations can help you keep your vehicle in good shape and avoid more expensive issues in the long run.
Paying for a house doesn’t stop with the mortgage. Home repairs, from fixing a leaky roof to replacing a furnace, are notoriously expensive. To better manage these costs, shop around and get several quotes before settling on a service provider for your fix. While you’ll ultimately need to rely on your savings buffer to cover these costs, you might be able to negotiate a payment plan with your provider so you don’t wipe out the entirety of your emergency fund in one fell swoop.
And don’t underestimate your own skills: If it’s possible to build a house by following online tutorials, then you have a good shot at spackling that wall. Visit workshops at local hardware stores or scour the internet for home repair articles written for laymen. Of course, when in doubt, it’s better to call in an expert, but avoid paying for simple fixes if you can do them yourself.
There are no DIY hacks for health care. But even with insurance, out-of-pocket costs like deductibles, copays and coinsurance can add up when you’re faced with a medical emergency.
A recent Bankrate survey found that only 39 percent of Americans have enough money saved to pay for a sudden $1,000 expense. The rest would have to rely on credit cards, cut back on other costs, take out a loan or borrow from family and friends to cover such an emergency. Now, consider that the average cost of an outpatient emergency room visit in 2016 was $1,917 — a 31 percent increase from just four years earlier. As ER costs continue to rise, a broken bone can become a serious financial burden. That’s without considering the cost of lost wages if you experience a major accident or critical illness that prevents you from working.
While earmarking savings for health care is never a bad idea, you can truly limit your financial exposure by assessing your existing insurance coverage and considering additional policies like accident and critical illness insurance or hospital indemnity insurance, which offer coverage for costs your primary policy may not, potentially without adding significantly to your monthly premiums. There is no open enrollment period for these supplemental insurance policies, so they can be purchased at any time.
In all of these scenarios, the clearest way to face expensive emergencies is to plan ahead and build in emergency buffers, whether through maintenance, savings or insurance.
Emergencies, whether medical, vehicular or otherwise, usually require quick action and a clear head. Following these money management tips will make sure you’re financially prepared for the unexpected — meaning you’ll spend less time stressing about the expense and more time tackling whatever comes your way.