Many of us pride ourselves on being financially responsible. We land secure jobs that give us a regular and reliable set wage. We budget, making sure not to exceed our disposable income, and always making sure that we have sufficient funds to cover the essentials and basics of life.
We avoid spending on frivolous items that are of little or no practical use to us. But this isn’t to say that you’re never going to experience financial difficulty in your life. No matter how financially savvy you may be, there’s always a chance that you could get caught out by unexpected costs.
Unexpected costs, otherwise known as “unexpected expenses”, are sums of money that you will become liable to pay that will come as a surprise to you. They are not regular bills that go out of our bank account. They tend to be one-off payments.
Unexpected expenses could cover vehicles or appliances breaking down unexpectedly. They could include sudden large healthcare or veterinary bills that aren’t covered by your or your pet’s insurance policies. You might find that you need to take an unexpected flight for some reason or another. Maybe you are invited to a wedding relatively last minute and have to fork out for a gift to be polite.
These are just a few examples. As you can see, unexpected costs can cover a wide variety of categories, and they can range from small costs to extremely large costs. However, there are ways to deal with them effectively and minimise the disruption that they have on your life in general. Here are a few steps that you might want to consider taking should you be hit by an unexpected cost yourself.
Save in Advance
The first, and probably the best option that you have when it comes to covering unexpected costs is to save in advance. If you haven’t yet been hit by any unexpected costs, it’s a good idea to start saving now, just in case. Sure, this isn’t the most fun use of your money. But you’ll be thankful for your efforts if you do suddenly find yourself in need of money. You will simply be able to access your savings and cover the costs with a minimum amount of stress.
It’s generally best to put your savings into a specialist savings account. Your saved cash will generate more money in one of these accounts, rather than simply being stored away. In order to determine how much money you should be putting into a savings account or emergency fund, you should take a look at your budget. Dedicate a certain percentage of your disposable income to deposit into your savings account.
Never place income that is required for necessities such as housing costs, energy bills, or other necessary expenses into a savings account. It’s important that everything that has to be paid is paid, and that anything extra can be put aside.
Take Out a Personal Loan
If you find that you need fast access to cash and you aren’t sitting on any savings, you can always consider taking out a personal loan from a reliable lender. When you take out a personal loan, a professional lender will offer you a given sum of money that can then be used to cover your unexpected costs. You will generally then pay the lender back an agreed amount on a monthly basis for a set period of time.
Sadly, lenders don’t offer you this money out of sheer generosity. Instead, they make money by giving you the money that you need by adding an interest rate to the loan. This interest rate is essentially a fee for the service of giving you the money when you are in need.
The higher the interest rate on the loan, the higher this fee is. The lower the rate is, the lower this fee is. So, you want to find a loan with as low an interest rate as possible. On the bright side, as long as you pay the loan back on time and as agreed, your credit score will increase.
Take Out Insurance Policies
Many unexpected costs could be covered by insurance policies. These policies will see you pay a specific amount of money on a monthly or annual basis, and should the event or incident that they are insuring you against should occur, they’ll pay out the necessary sum to put wrongs to rights.
A phone insurance policy, for example, will replace lost or stolen phones or repair broken phones. A kitchen appliance insurance policy will repair or replace broken or damaged refrigerators, ovens, washing machines, or tumble driers.
No matter what you own or have to pay for, there’s bound to be some sort of insurance policy to cover it. Just browse the market and use price comparison sites in order to secure the best deals.
Sure, unexpected expenses can be irritating, undesirable, and in general a pain. But they needn’t sink you into irrecoverable debt or financial worry. By being prepared well in advance for potential costs that you may incur down the line, you can save yourself a whole lot of stress and hassle, as well as a whole lot of debt. So, follow the steps above to make life as simple for yourself as possible!
This is a collaborative post.