So you've created your budget, have been monitoring your income and spending, and are starting to feel in control of your funds. Things are going well...and then it happens. The unexpected expense. A few months ago, I enjoyed my very own unexpected expense in the form of a brand new furnace for my house (#HomeOwnershipProblems). It happens to all of us. So how do we all prepare for the unexpected new furnace, the 5 weddings you've been invited to this year, child activities, car problems, medical bills, or other unexpected cost? Easy...expect the unexpected expense. Here's my two cents.
Emergency Fund - There's no way around it. If possible, it is important to set aside funds for unexpected costs. Starting with $500-$1000 set aside for EMERGENCIES ONLY can help relieve a bit of financial stress. Remember though, this is only a start. You want to continue to build on this fund. Six months to a year's worth of expenses should be what we all strive for to have set aside as an emergency fund. #FundGoals
Emergency Credit Card - Let's be realistic. Please raise your hand if you have a fund that covers a year's worth of expenses ready to roll...3 months...1 month? Raise your hand if you've had emergencies that are capped at $500-$1000. I don't even think a furnace exists for purchase and install for that amount. Long story short, we are all at different points in our financial independence journey and... ALL EMERGENCIES ARE NOT CREATED EQUAL. Having a credit card to be used for emergencies only can be another good option to prepare for unexpected costs. You must be disciplined though and only use it for infrequent unexpected costs. #SwipeResponsibly
No matter how well you budget, watch every dollar that comes in and goes out, the unexpected expense is guaranteed to happen to all of us. Planning for these costs using the options above can help to take some of the surprise out of these emergencies. #ExpectTheUnexpectedExpense