What are the Kinds of Unexpected Expenses?
There may be numerous reasons due to which unexpected expenses arise. Sometimes, one needs additional costs to spend on excess heat or power usage, or urgent home repairs. There may be unforeseen expenses for insurance premiums, medical needs, special occasions and gifts; this list may go on indefinitely.
Basic Steps to Create a Money Management Plan
Unforeseen, emergency or seasonal spending ‒ it does not matter how you call them, if you do not prepare for them, they can easily unsettle you and break your plans.
Here are several steps that can help you make a budget plan for sudden expenses:
1.Identify unexpected costs you may need. Write down a list of sudden general expenses, including car insurance, house insurance, birthday and Christmas presents, visits to your dentist, etc.
2.Take a look at the calendar for the last year, and at your bank and credit card statements so that you can see what costs you paid, for instance, trips or other entertainments. If you are a parent, take into consideration what you paid for your children’s activities, such as music or art lessons, school fees, etc.
3.Calculate the amount over and above your normal monthly spending, and divide it by the number of paychecks you receive each year. For instance, if the sum of your unforeseen expenses is $4000 per year, divide by 26, if you are paid biweekly. You should put this amount, $153, to a separate account so that you can take it when there is a need.
4.If it is difficult to revise your monthly budget to put $150 aside, you can start with the amount that seems for you to be easy to manage, for example, $50 each paycheck. As soon as you realize that you do not miss $50, increase it to $100, and go on until you reach $150.
5.It can be much easier for you to make your savings automatic using special money management system. You can set up automatic transfers to an account you do not use every day. This way, you will be sure that you do not forget about the savings.
Remember about Your Goal
When you see the growing balance of your savings account, there can appear a desire to spend this money unadvisedly. Before making a sudden purchase, think about your goal for that money, and whether this purchase will push you closer to that purpose or not.
Remember that savings do not mean that you will never spend your money; you will spend it a bit later.
You should make a choice what to spend this money on later depending on your own priorities. The thing is to save as much money as you can for a certain reason, and plan your financial future. If you would rather spend your money on a wonderful trip than on several weekly parties, try to predict any unforeseen expenses to be prepared.
Remember that all of the rich people hope for the best and plan for the rest.