Even the perfect budget has flaws if there isn’t some room for mishaps. Things happen. Challenges present themselves. Life comes with its surprises.
Unexpected expenses can be really hard on your finances if you don’t plan for them. Here are seven common “unexpected” expenses you can actually plan for. Planning for them relieves a lot of stress in the event they actually come up.
Medical Bills
No one likes to think about getting sick. But the reality is that it’ll happen from time to time. Sometimes it’ll be the occasional cold that requires simple over-the-counter medicine. Other times it’ll be more severe and require a doctor’s attention. In those instances, medical bills can rack up pretty quickly.
In addition to the anticipated things like co-pays and deductibles, you may be responsible for more expensive bills if you find yourself needing inpatient care.
One way to protect yourself is to choose the most comprehensive health insurance plan. High deductible plans have gotten a lot of positive attention lately. But if your intention is to avoid expensive medical bills, you’ll want a health insurance policy that comes with a higher premium and low deductible.
You can also plan for medical bills by enrolling in a tax advantaged flexible spending account (FSA). FSA’s allow you to pay for eligible medical expenses with pre-tax dollars.
Vet Visits
Much like medical bills, you typically don’t expect your pet’s health to cost much. You may think that the annual check-ups and vaccinations are enough to protect your pet from health problems. If only that were the case…
There are a variety of issues that can arise in pets even if you feed them the perfect diet and otherwise manage their health. For example, your pet could consume a foreign object. Your pet could catch something from interacting with other animals. The list goes on and on.
So when the unavoidable eventually happens, you’ll find vet visits to be expensive. Between the cost of being seen and the cost of the actual medications, the bills quickly add up. I know this firsthand. A recent health complication with my cat costed me over $500 between two vet visits and the medications.
The best way to prepare for these expenses is to save money throughout the year. Create a dedicated savings account for your pet and contribute to it on a monthly basis.
Pet insurance is another option. Just make sure you do your research. Different policies offer different levels of coverage and some don’t cover pre-existing conditions.
Car Maintenance
I don’t own a car. But I hear my friends complain about the cost of maintenance all the time. Here’s a short list of some of the maintenance items you can expect when you own a car:
- Oil changes
- Brakes
- Transmission services
- Tires
That list only includes routine maintenance items. You’ll have one-off maintenance and repair expenses as well. Edmunds has a helpful True Cost to Own tool that breaks down how much you can expect to pay for a car over the course of five years.
I plugged in the numbers for a 2010 Toyota Camry. Edmunds estimates that maintenance and repairs alone will cost over $1,000 each year.
Setting up a dedicated savings account is the way to go to avoid having car maintenance costs break your budget. You can set up automatic transfers into this account so that you don’t even have to think about the savings. Then, when you need it, the money will be right there.
Home Repairs
I don’t own a home either. But I’ve heard the horror stories about costly major repairs. If you own a home and have been lucky enough to skate by without any major repairs, now is the time to start saving.
HomeAdvisor offers wonderful guides on how much you can expect to spend on a wide range of home repairs. For example, it costs about $7,000 on average to install a new roof.
One way to plan for home repairs is to save any windfalls you receive throughout the year. If you just got married, consider saving some of those cash gifts in an account marked for home repairs. Got a tax refund? That’s an excellent opportunity to save for home repairs as well.
Gifts
By now, we all know to plan ahead for holiday shopping and birthdays of friends and family. What about the occasional wedding, engagement party, or baby shower? These one-off events call for gifts. When more than one of these happens in the same year, you can find yourself spending a good amount of cash.
One way to plan for occasional gifts is to calculate how much you spent on gifts the previous year and add a small percentage to it – say 10 percent. Budget that much for the upcoming year. This will give you a good buffer so that when a wedding or other event comes up, you’re more than prepared.
Any money left over at the end of the year can simply be put into savings for the next year.
Lost/Stolen Items
Worst case scenarios are uncomfortable to think about. Items becoming lost or getting stolen are a reality, however. For example, if you car is broken into and any valuables are stolen, you’ll have to replace them. Personal items typically aren’t covered in auto insurance policies.
If you lose your phone, you’ll have to pay to replace that as well. Some phone insurance policies may cover misplacement, but you’ll still have to pay a deductible.
These are just a couple of examples to demonstrate how lost/stolen items can impact your finances. Of course, it would be a pain to create separate savings accounts for each and every potential expense that may come up. Another option is to have a general buffer in your checking account. This will make it easier to absorb these unexpected costs.
Computer Problems
Computer problems are not only incredibly frustrating, but also very expensive. It seems that they always occur at the most inconvenient times. From the optical drive no longer reading CD’s to the keyboard malfunctioning, there’s an endless list of things that can go wrong with a computer.
The best way to protect yourself is to get insurance. Apple, for example, offers AppleCare for all of its products. I have AppleCare for my MacBook and have had plenty of repairs performed on my laptop for free. It comes at a yearly cost; but it’s totally worth it.
Wrapping Up
These seven “unexpected” expenses are things you can actually plan for. Whether it be through setting up a savings account or purchasing insurance, there are ways to plan for the seemingly unexpected.
