It’s Always Something: Dealing with Unplanned Expenses

by Kevin on August 4, 2009

When I was growing up I picked up on a phrase my Dad used to always use: It’s always something.

Whenever something at the house would break, it’s always something.

Whenever something on the car needed fixing, it’s always something.

Every little unexpected or just simply annoying expense that popped up… it’s always something.

Thankfully my parents were wise enough to have some money set aside in the budget or their savings account to pay for these annoying somethings. I’m sure this is also where my father started instilling “Son, save ten percent of everything you make and you’ll be just fine.

On Friday we got to encounter one of our first real annoying somethings. I’ll tell you about it in more detail tomorrow, but today I wanted to share tactics to prepare for those things that just happen to pop up.

Save Up a General Emergency Fund

Many people see an emergency fund as the first line of defense against those expenses that pop up out of no where.

I look at it as the opposite. Yes, you need an emergency fund. It’s one of the key steps to my No Debt Plan.

But an emergency fund should be the last line of defense when something unexpected occurs. Again for many this is as far as they get — they build up the emergency fund and are so far in debt that it takes them years to get out.

So yes, build up an emergency fund. But there’s more you can do.

Identify Unexpected Problems

The easiest way for a problem to not be unexpected is to think ahead and expect it. Simple enough, right?

Not really. Our lives are really complicated. Here’s a quick list of things that could happen that would be annoying:

  • one or both of our cars could die or need a lot of expensive repair
  • one of our appliances (refrigerator, dishwasher, stove, washer, dryer, etc.) could need replacing or repair
  • I might leave a pen in a pair of pants, thus ruining a load of white laundry
  • our water heater, air conditioner, or heat pump could go out
  • I could drop my cell phone in a puddle

Just look at that simple list. That’s just a handful of things that could happen. Thousands of dollars are tied up in those five bullet points.

Yet this is a good process to go through. Open your eyes. Look around. What is getting up in years and may need replacing soon? Make your list and start thinking of what you would do if something needed to be replaced.

Create Emergency Funds for Each Category

Here’s the key!

You can’t possibly think of every single thing that might happen. Even if you could it would be so long it would be impossible to adequately prepare for each.

Instead I recommend lumping those expenses together into major categories. We only have two major categories: car maintenance and home maintenance. Each month we set aside a little bit of money into each category in anticipation of something requiring additional funds from us.

Do these little funds adequately cover us from everything? Absolutely not. But if you have $300 saved up and your water heater needs an $800 replacement you’ve taken a big chunk out of that $800 total. (And hey if you were lucky enough to go a long period of time without any major problems it might even cover all of that cost.)

Remember your emergency fund is the last line of defense. These little mini-funds are the first line of defense. If they get wiped out so be it, but hopefully they make a dent in the oncoming wave of unexpected costs.

I highly recommend you start putting a little bit of money aside each month into your major categories. Most people will need car and home maintenance. You might add medical costs in as well. I’m sure there are other things I’m not thinking of, too.

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