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When you hear the term “surprise expenses”, you might think of things like medical bills from injuries, repairs after a car breakdown, or home maintenance that you didn’t see coming. A lot of people who have never experienced these things don’t really worry about them. You’re a careful person, right? Even if you haven’t run into any full-blown disasters yet, surprise expenses can happen to anyone, and will leave your personal finances in tatters if you haven’t planned for them. Here’s some advice to mitigate the strain when life pulls the rug from under you.j
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Create an Emergency Fund
I’m not talking about your savings, which may be in a pretty healthy condition. That’s for retirement, your next house, or a once-in-a-lifetime vacation. Here, I’m talking about a cash cushion which you’ll be able to fall back on in the case of a genuine emergency! Of course, everyone’s going to have different means for their emergency fund depending on their income, assets and so on. However, $1000 dollars should be the bare minimum you have saved away. This might sound excessive if you’ve been a particularly cautious or lucky person. However, as unpleasant as the thought may be, there are certain issues that there’s no way of predicting. You can’t control things like the weather, disease, deaths or economic collapses. Just because you’ve never had to pay for an organ transplant or personal injury lawyers in the past doesn’t mean that you’ll never have to in the future!
Look Through Last Year’s Expenses
A lot of people have some idea of the “surprise” expenses that are ahead of them, they simply don’t know it! If you found expenses took you by surprise a few times over the past year, it may be worth living with some kind of plan for them happening again. Print off all your bank statements from last year, and go through them, noting down anything that had come as a surprise. If your area was hit by a patch of severe weather, for instance, start budgeting for snow tires or damage restoration, using last year’s expenses as guidelines. If you had to pay out for some kind of damage to your home for another reason, read up on this kind of issue. It could be a warning sign of a much bigger, and therefore more expensive, problem. These are just a couple of examples of how you can make yourself better prepared for the year ahead of you.
Fix your Credit
Ideally, you’ll make enough smart investments and saving decisions that you won’t need any kind of loans to cover your unexpected expenses. However, if you’re lagging behind on this, and there’s a chance that you may need to take out a loan at some point in the future, then it’s important to start fixing your credit now. Our credit scores play a big part in any kind of loans these days, unless you want to pay extortionate interest rates. Various other financial products could be out of reach for you if you have a poor credit score. Get a credit report from any of the major providers, then go through it methodically, checking for any errors and having them corrected. After that, you can start to get into better spending and borrowing habits to ensure that your credit report starts looking better and stays that way. If you work on your credit now, unexpected costs further down the line won’t be any more of a burden than they have to be.
Start Living More Frugally
This last tip isn’t exactly rocket science. The more you spend in your day to day life, the less money you’ll have to throw around, and the harder it will be to cover any nasty financial surprises that can spring up in the future. We’d all like more money, and you might feel that you’re living as frugally as you possibly can. Think about it for a moment though, and figure out if you’re only living as frugally as you’d like to. For the large majority of people, there’ll be a wide range of little changes they can make to their lifestyle and spending habits which will save a lot of money in the long run. Start trying out value brands rather than the products you usually buy, and find some that you like. Start being more strict with sticking to your shopping list, and avoid impulse buying. If you have a subscription that you barely use, cancel this as well. There are countless ways to save money, you just need to think about it!