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How to Plan for Unexpected Costs

How to Plan for Unexpected Costs

Save to plan for unexpected costs

Get personal budgeting tips to help feel financially secure

Life brings unexpected surprises. And while many are welcomed, some are expensive. Having the right financial preparation can help make those unexpected costs easier to handle. Let’s take a look at how you can prepare. 

Build up an emergency fund

Save for upcoming expenses

Car repairs. Replacing a water heater. The need for unanticipated medical care. An emergency fund can take care of these and other unexpected expenses. Try to save up to six months’ worth of expenses and tuck that away into an emergency fund. While that may seem daunting, starting a fund and saving as much as you can each month is a step in the right direction.

Here are some ways to get started.

Scrutinize costs

You may have more money available to save than you realize. Start by combing through your monthly living and entertainment expenses to see whether you can cut any unnecessary spending.

Can you make coffee at home rather than stopping at a shop on your way to work? Can you do manicures and pedicures at home? Are there digital music or movie subscriptions you have but almost never use?

The money you save in those areas can be put into your emergency fund account.

One note: Cutting down on expenses doesn’t mean giving up activities you love. It is a more intentional view of what you’re spending and how often. And it’s about analyzing what you can easily do without, or at least cut back on.

Set up automatic deposits

Manual deposits can be too easy to forget or push off to tomorrow. Instead, set up automatic transfers from another account into your emergency fund. It’s best to schedule these on payday, so you can easily save part of your paycheck.

Track easily overlooked expenses 

It can be easy to forget you’ll be spending extra money in December for presents. And do you factor in gas money when you go on vacation? Do you plan to buy new clothes? What about car repairs—while often considered an unexpected cost, cars break down or need major maintenance, like new tires.

Look back on your last 12 months of expenses. Find the costs that weren’t necessarily planned but should be expected. Also look at irregular expenses. Twice-a-year dentist appointments and oil changes are irregular cost examples.

Now that you’ve tracked your overlooked expenses from last year, you now know approximately how many upcoming expenses you have. Set aside that amount, plus a little extra. For example, one financial planner recommends saving 1-2% of your home’s value every year for home maintenance and repairs.

These are just some of the ways you can get started by looking at your expenses. For more ideas, read our blog, “Building an Emergency Fund.”

Greater Alliance can provide a sense of security

If planning an emergency fund for unexpected expenses or applying personal budgeting tips feels overwhelming, Greater Alliance can help. Along with GreenPath Financial Wellness, we offer a debt management plan, free financial coaching and education, and more.

If you’d like guidance planning for unexpected costs, call us at 201-599-5500 or stop by a Greater Alliance branch today.