9 Unexpected Expenses You Need to Plan For
How to Anticipate 'Unexpected' Expenses
WHAT'S THE PAYOFF?
Many of life's expensive surprises are quite predictable. Save yourself stress by being prepared.
WHY YOU SHOULDN'T AVOID IT
Things often wind up costing more when you don't attend to them early—and you could find yourself scrambling for money.
We all have expenses that we kinda sorta know are looming—the dentist mentioned that you'll need a crown soon, parking rates at your office are going up in the fall. Things like that are stressful, so you file them in the back of your mind, hoping they'll go away. Which of course they don't, and yet when they arrive, they somehow feel unexpected.
This happened to me last year. Because my husband and I pushed the thought of paying for our son's summer camp to the back of our minds, we weren't prepared—and missed out on the 10%-off early bird deal. After that, we started our "I Know It's Coming" fund, an account into which I put about 5% of our income to cover those "unexpected" expenses. Here's how to think ahead.
Grab a pen, take 15 minutes and start jotting down what's on this year's horizon. A study published in theJournal of Consumer Researchshows that people tend to be good about factoring things like food and gas into their budgets, but exclude non-everyday expenses, and there are more of these than you may think. The first step is to put those irregular outlays on your radar.
Skim through your current calendar and make a list of expenses that you either know or can guess will soon pop up. (Refer to last year's calendar if you have it.) Be sure to include birthdays and other occasions (weddings, graduations, baby showers and the gifts you'll be buying to celebrate them); a vacation or long weekend travel tradition; regular commitments (the annual library fundraiser); regular home and car maintenance; anything kid-related, like a tutor or camp—and, of course, the holidays, including the cost of entertaining. Check in with family members so they can remind you of what you might have missed.
Now it's time to face the "knowable unknowns"—those inevitable expenses hiding in plain sight. You know: the drip in the basement, that crown the dentist mentioned, the stuff you rush past with a mental note to deal with soon.
Take a quick but honest inventory of your home, property, car, kids, appliances—call up the files that you've saved in the "Must get to this!" folder in your brain, and ask your husband and children to do the same. There's the weird grinding noise the car makes when you go over 55 mph, the garbage disposal (which hasn't worked since last Christmas), the mole the doctor says is benign but still needs to be removed soon.
Again, write down everything that needs to be tackled or fixed in your family's life, then star the expenses that are pressing. You can't—and don't need to—address everything at once, so prioritize the ones (like the dead tree branch hanging dangerously over the garage) that will cost far less if you handle them now rather than after they've caused serious damage.
You're probably thinking:There's no way I can save for all of life's randomness.True. But you can plan. If you're 100% mentally prepared and 50% financially prepared, that's a heck of a lot better than being willfully ignorant with lots of preventable debt on your hands.
Mock up a ballpark budget for the items on your list. If you spent 0 on the holidays last year, that's a fair estimate for 2013. CostHelper.com gives you a good range of prices for a variety of common repairs and services.
And don't panic! Some of these expenses are probably covered by whatever wiggle room is in your budget. For those that aren't, open up an "I Know It's Coming" fund. Set up a designated savings account, and arrange for automatic transfers into the fund every payday. Having this insurance will go a long way toward minimizing the impact of those not-so-surprising surprises, and leave you with a serene feeling that you've got things covered. Now, breathe!
Following WD's advice, Los Angeles real estate agent Chantay Bridges, 36, took out her datebook and spent some time anticipating her expenditures for the coming six months. She found many more than she thought she would. Here's what she learned.
"Writing out my list helped me remember expenses that I normally wouldn't have thought about until after the bills came: the Costco membership I need to renew next month (0) and the phone upgrade I want (0). I also promised to take my nieces and godkids to a water park in July (0), and back-to-school shopping usually costs around 0 total. Now that these expenses are front of mind, I can purchase theme park and airfare tickets early to get cheaper prices. I'm confident that I'll be better prepared for the really unexpected stuff."
MP Dunleavey writes monthly in WD about easy moves you can make to improve your finances.
“How to Anticipate 'Unexpected' Expenses” is part 10 of a multipart yearlong series.
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