Budgeting For Unpredictable Expenses
Life is rarely as predictable as we would like. Disaster, illness, and unemployment can all throw a budget into disarray so how can you plan for the unpredictable?
When creating a budget you are essentially creating a plan based on a few certain predictable parameters that occur on a regular basis. Most of the time these parameters will not change and little else will influence them in a major way. But life has a tendency to find tranquility and shake it up.
So how can you maintain a budget if a financial curveball is right around the corner?
Acceptance
The first step is accepting that there will be irregular expenses in your life.
Tomorrow you could spill soda all over your laptop or drop your expensive cell phone in the toilet. Both of these things would need to be replaced quickly and both would cost a good chunk of change you probably don't have sitting around.
While you could easily put any of these on a credit card your best bet is to steer away from that as much as you can so it doesn't build up interest over time.
What Can You Do?
Work that uncertainty into your budget and create an 'irregular expenses' fund outside of your normal savings. This can be an actual bank account or maybe just a stash of cash under your mattress you add to over time and is quickly accessible in an emergency.
While your savings will require regular deposits this fund won't require so much work. Every pay period throw a $20 in there, or more if you can. Aim to save around $500-$1,000, enough to cover a sudden car repair or broken cell phone without having to dip into your long-term savings too much.
But what if your unexpected expense costs more? Well, it probably will. But with this fund your long-term savings won't take so much of a hit since this cash exists outside of your regular financial sphere. While shilling out for the expense will still sting it won't hurt your regular essential expenses as much and you will be able to get back on budget quickly.
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