It can happen to the best of us; one minute everything’s going about as well as we could hope for, our books are balanced and it’s smooth sailing ahead.
And then some surprise expense leaps out from the shadows, completely obliterates our peace of mind, and sends us scrambling to rally our resources and try to avert a complete financial catastrophe.
It’s an unfortunate fact of life that things just do go wrong from time to time, and unforeseen expenses are going to occur at random intervals. There are things we can do to help stave off some of the uncertainty. Reading a good SSP guide, for example, can help us to get a better sense of our sick pay entitlement at work if we’re suddenly struck by a medical condition out of the clear blue sky.
As a rule, however, it’s best to accept that those nasty surprise expenses are a fact of life, and to take adequate steps to protect yourself from them.
Here are some tips for doing just that:
Budget for the unforeseen
By definition, you can’t know the unknown, so it’s not realistic to assume that you’ll also see an expense coming before it arrives. You can never know, for example, that you’re going to have a minor car accident on a given day.
What you can do, however, is to assume that unexpected expenses are always on the way, and to budget for the unforeseen continually, by setting aside a bit of money each month for “emergency funds”, or “unexpected expenses”.
That way, if you have to get a new engine put in your car on short notice, you at least won’t be left with your head in your hands wondering whether to cancel your child’s birthday celebration or sell your computer in order to cover the costs.
Make a note and set reminders for all recurring payments
Many of the unforeseen expenses that we encounter in life are only really “unforeseen” because we’ve forgotten about them.
This is typically the case with digital subscription services, which bill annually or quarterly. Since money isn’t leaving our account each month for the service in question, we put it out of our mind. Then we’re hit by a series of meaty charges on 01 January.
Make a note of any recurring payments and subscriptions, and set reminders for them. Be sure to budget appropriately for those expenses before they arrive.
Have a flexible budgeting system
One of the reasons why YNAB — or You Need a Budget — is such a popular money-management app and service, is that it’s flexible and adaptive. When you overspend in one budget category, you can easily move excess funds from another category to cover the overspending.
Whether you choose to use YNAB or not, there’s a lot to be said in favour of having a flexible budgeting system in place, one that allows you to transfer funds between different budget categories as and when necessary.
It may be that you can absorb your unforeseen expenses better if you’re able to tell at a glance that you can trim a bit of money from your “movie nights” and “dining out” budget categories for the month.
This is a collaborative post