There’s no way of knowing what little surprises may happen on any given day. It can be an emergency situation such as a car problem, a medical issue, or a sudden home repair that can wreak havoc on your finances. Then there are smaller things like birthday parties and weddings that you can plan for, but may just forget. It could be any number of things with any amount of money that needs to be spent. We call them unexpected expenses, but you can still be prepared and avoid credit card debt as a result of these surprises.
Budgeting for the Unexpected
If you want to be prepared for unexpected expenses, ironically enough, you have to expect them. You can’t predict the future, but you can set some money aside for the typical things that will come up. Similar to an emergency fund, we’re talking about taking a portion of your monthly income and earmarking it for something in particular.
Go through your calendar for the year. Make a list of each holiday, birthday, wedding, scheduled home or auto maintenance, and any other expense that you might be able to predict. Calculate what you plan to spend for all of these events, and spread it throughout your budget. If your total winds up at $1,000, then you’ll need to account for about $83 each month. Not so bad if you’re expecting it. You can be prepared and avoid credit card debt over unexpected expenses.
For the more serious matters like car repairs, job loss, and medical issues, refer to our previous post about Building an Emergency Fund.