At one time or another, most of us have fallen victim to a budget buster. While you can never prepare for every possible unexpected expense, you can prepare for most of them… All it takes is a little planning.
You see, the thing about unexpected expenses is – if we’re being totally honest with ourselves – they’re not really unexpected. We know they’ll comes sooner or later, right? So why not just expect the unexpected and formulate a plan? Let’s get started!
Plan for the unplanned
As we’ve already acknowledged, we know most “unexpected” expenses will rear their ugly head at some point, so let’s focus on how to defeat the beast before it strikes. Okay? Here we go.
- Compile a list of irregular expenses. Sit down with your significant other and write down every irregular expense you can think of. Anything that is not a monthly bill is an irregular expense. Write them down and estimate how much they will cost.
- Save for your irregular expenses. Adding up all the expenses you came up with in Step One and dividing by 12 will give you an amount that you will need to save each month.
- Don’t forget miscellaneous expenses. After you come up with your total amount, add a safety cushion for each month. Either a flat dollar amount or a percentage, depending on your circumstances. This will help you save for those miscellaneous expenses you forgot about, as well as any truly unexpected expenses.
- Fund a dedicated savings account automatically each month. Create an automatic transfer of the final amount from step three into your new irregular expenses savings fund each month.
Now let’s break a few of these points down and talk about them in a little more detail.
Compile your list of irregular expenses
Trying to come up with all your expenses can be a little intimidating, and this is actually the hardest part of the process, but don’t worry… You won’t even break a sweat, and once you’re done you’ll feel great knowing that your plan will save you a lot of headaches, time, and money over the long haul.
Be sure to include infrequent payments such as car repairs, life insurance premiums, auto registrations, and so on.
If you don’t think of everything, don’t worry, at least you’re saving — and don’t forget about the extra amount you included for miscellaneous stuff. My wife and I have been doing this for the last year or so and it has saved us so much trouble, stress, and cash. Being prepared is so damn nice!
Save for and fund your irregular expenses
You have your list of expenses and have accounted for additional miscellaneous expenses that are bound to happen, now you just have to start saving money. Let’s say your expense amount comes to $200/month… Just start funneling that money into your new savings account.
Don’t have room in your budget for an extra $200 each month? I don’t buy it. Do you even have a budget? A WRITTEN budget that you actually maintain and adhere to? If not, there’s your first problem.
Cancel your cable TV. Cancel your cell phone and get an unlimited Vonage line for your home for $25/month. Save money on groceries by planning meals, shopping in bulk, and growing and processing some of your own food.
If you don’t have the extra $200 at the end of the month, then you need to start trimming down your standard of living. Don’t like the thought of that? The alternative is to continually have unexpected expenses popping up and taking all your dough. You make the choice, but I’ve done both and my advice for you is to cut back, plan, and save.
Exercising your self-discipline is a good thing… It’s one of the keys to financial success.
It’s really this simple:
Now that you’ve written things down and are saving, there is almost no reason why you should ever let anything bust your budget ever again! You do have a budget don’t you?
What About You?
Do you have a plan to stop budget busters dead in their track? Let us know how you do it.