An unexpected expense is something that you don’t anticipate in your budget. It’s totally unpredictable, unlike your typical housing costs, utilities, and debt payments. These you pay like clockwork, usually on a monthly basis.
While the unexpected doesn’t follow a set schedule, don’t confuse them with invariable costs. Some of your more irregular expenses may have an unpredictable timeline, but they shouldn’t be a surprise.
Take, for example, household or automotive maintenance. You may never be able to guess with accuracy what will go wrong with your vehicle next, but all car owners can expect to sink some money into tune-ups and other repairs throughout the lifetime of their vehicle.
Why Does This Definition Matter?
While memorizing definitions may not be your idea of a fun time, it comes with three major perks:
1. Realize Your Own Failings
Unexpected things in life take you by surprise, but being caught off guard doesn’t necessarily mean you’re dealing with a truly unexpected expense. You can be surprised by regular expenses if you don’t pay attention. Knowing the difference between the expected and the unexpected helps you prepare for the future. By identifying patterns in your spending, you have a better chance of noticing warning signs that an expense is on the way.
2. Take Proactive Steps
Acknowledging that the unexpected can happen, even when you prepare, helps you budget for genuinely unpredictable expenses. You can plan in advance for unusual repairs, prescription medication, and even unforeseen travel by saving every month with an emergency fund.
3. Know When to Borrow
You won’t always have the cash you need for something you want — whether it’s prescription medicine or a weekend getaway. But only one of these examples is worthy of borrowing an online loan.
The financing experts at MoneyKey recommend using an online loan over non-recurring, unexpected expenses. Knowing what counts as an unexpected expense can also help you determine if something is worth borrowing money over, especially when it’s not as obvious as a life-saving prescription. More importantly, you’ll know when it’s better to wait and save for the things you want, like a vacation.
How to Budget for the Unexpected
A well-balanced budget helps you take control of your spending, even when it’s unpredictable. You just have to set aside enough savings into an emergency fund.
To do this, you’ll need to tally your usual expenses and split them into these categories:
- Regular: This will be the easiest one, as it’s all the stuff you pay on a monthly basis. Housing costs, groceries, utilities, personal loans, and insurance payments fall under this category.
- Irregular: You’ll need to look at the past year of spending to catch every irregular expense. Essential spending on taxes, annual subscriptions, planned maintenance, and healthcare deductibles belong here, but so do fun splurges on vacations and entertainment.
- Unexpected: A retrospective look at your spending can see what expenses blindsided your budget last year. It gives you a good idea of what to expect in the year ahead, although it may not be perfect.
Making this list helps you identify regular and irregular spending that you have to prioritize in your budget to ensure they don’t catch you off guard. You can also start to think about how you can stretch your budget to cover truly unexpected expenses. What fun splurges can you limit to save more in an emergency fund? This guide on cutting costs will help you do just that.
To Recap:
An unexpected expense is a one-time purchase or repair that doesn’t have a predictable spot in your budget. While it may be totally random, your budget can help you be prepared — no matter what.
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