How to plan for unexpected expenses

Is it just me or does it seem like EVERY month something “unexpected” happens? Seriously. Just a little recap…but in July our air conditioner went out (in AZ), two weeks later we had a massive swarm of bees outside our front door ($160), in August we moved across the country, in September we bought my husband a work truck, tools for his business, insurance/licensing for his business and general house stuff to get set up in NC, and now this month we had both our cars in the shop (husband’s new truck dies multiple times in one trip // our family SUV needed a new tire). November will be Thanksgiving, time off work for my husband and the start of Christmas shopping! I’m sure something “unexpected” will happen then, too.

So how do you plan for the unexpected expenses?!?!

First, let’s define “unexpected.” I used to think of unexpected expenses as things like birthdays, baby showers, weddings, holidays and things of that nature. But honestly, we know those things are coming up and usually have many months to prepare for them. That is NOT an unexpected expense.

Unexpected expenses would be:

• a car breaking down
• an appliance breaking
• heating/ac going out
• washer/dryer breaking
• child getting sick
• home/roof repair
• car accident
• pet sickness
• a massive swarm of bees outside your door (hey, it happened)

There are more, of course, but all of those things are expenses that you didn’t foresee happening and came with no warning. There are a few ways you can go about being prepared for these unexpected expenses.

ONE Have an emergency savings account. Seems obvious, but it’s necessary. We actually just recently adapted the “emergency” savings account. Formerly, we had all of our savings in one account. Though this method is technically the same (we would have had the same amount in savings whether it was all together or split up with $1,000 in an emergency fund and the rest somewhere else), it stings a little less when you have to withdraw money. I’m one of those people who hates taking out of savings. It almost makes me sick to my stomach (I know…). This quality drives my husband NUTS, but…I strongly believe it’s one of the reasons we’ve been able to save so much!

TWO Adjust your budget. If an emergency happens, look for ways to adjust your budget for the month to cover the expense. We do this BEFORE going into our emergency fund. Little ways you can spend less for the month include not going out to eat, driving less (gas adds up!!), cutting back on beer/alcohol, using your ac/heater a tad less and so on. Another idea would be to make some income on the side. My husband is a handyman so he can usually pick up additional work pretty easily. You could also sell a few items on Craigslist, do some freelance writing (check Odesk, Elance, Craigslist or just Google “freelance writing jobs”), mow your neighbors lawn, offer to babysit, sell plasma (guilty), house sit, rent out a room in your house, pick up a part-time job and more. This is always the goal for us – adjust our budget and pick up more work BEFORE going into our emergency savings.

Things you DON’T want to do

Take out of your retirement. This is a huge no-no as you’ll most likely have to pay high penalty fees. Plus, who wants to take out of their retirement money to pay for an ac repair??

Cancel your term life insurance. Another huge no-no since you never know when something will happen. Life insurance is one of those things that you just need whether you like it or not.

Use a credit card. I understand that sometimes this is your only option. If that’s the case, of course you will end up using it. Make a plan to pay it off within the month by adjusting your budget and picking up side jobs (see item TWO) to avoid paying interest.

So, that’s how the Brooks’ household goes about paying for unexpected expenses. How do you prepare for these expenses?! Any tips?! I’d love to know!!