How Can You Budget For Things That Come Up?

September 2, 2015

It's hard to plan for life's surprises...here's how to budget for the things that come up in life!

Have you created a budget, only to be derailed by unanticipated expenses?  When people create a budget for the first time, they find it easy to see how much they spend per month on gas, groceries and eating out- those monthly, recurring experiences which are easy to plan for and predict.  It’s so tidy and you start out on the right foot!

You start to follow your budget, confident that you can stay on track and save money, but then something happens that doesn’t fit the plan… A coworker invites you to her baby shower, your car gets a flat tire and your husband lands in the hospital with a fluke allergic reaction.

Now your budget is shot and your motivation to keep going is gone. How are you supposed to keep up with all these changes? How do you manage a budget when every month, even every day, can be different than the next?

Read my tips below to see how to manage all those unexpected expenses:

Emergency Fund

An emergency fund is the most basic way to manage any surprises you get. For me, an emergency is when you have a surprise hospital bill or when you have to book a last-minute flight to a funeral. Those are true emergencies that you can’t plan for.

If you are in debt, you should start with $1,000 in an emergency fund, that will cover most deductibles and most of the small emergencies that will come up.  The goal here is to prevent MORE debt from coming in, and you do have to balance your savings efforts with your payoff efforts.  Having a baseline in savings prevents a small incident from turning into a catastrophe that can make your debt seem insurmountable.   If you have a house, you should have more in your fund in case your water heater breaks or your basement gets flooded- but start where you can.

If your job is less stable, you should aim for three to six months of expenses. Once you pay off your debt, you can also save up six months worth of expenses to cover a variety of emergencies.

Car Fund

Separate from my emergency fund is the car fund. You can average out how much you spend on car repair every year and set that amount aside every month. That way, when the car needs an oil change or something more serious, you can use that car fund instead of the emergency fund.

So, why can’t you use your emergency fund to pay for car repairs and maintenance?  The truth of the matter is- car repairs shouldn’t surprise you or take you off guard- we all know we need regular oil changes, new tires and with older cars, unfortunately, trips to the mechanic…though we can’t always prepare for those, they’re not an emergency like a hospital visit or a funeral.  Cars break down – that’s what they do. Being prepared for them by having separate funds is one way you can keep your emergency fund for more unique emergencies.

HSA

If you have a high-deductible insurance plan, contributing money to an HSA is a great way to start an emergency fund for your medical expenses. You can average out how much you spend a year and contribute to it on a monthly basis. That way when you have to go to the doctor, you already have enough to pay the bill.

This also ensures that you don’t have to worry about money when you’re ailing. If you can be thoughtful and plan ahead, then you can decide whether or not to go to the doctor based on how bad you feel.

Weddings, Baby Showers, Etc.

So, how do you budget for things like weddings, baby showers and gift collections for coworkers? A great piece of advice is to try not to budget every dollar that you bring in. That way, in case there’s a surprise like a birthday dinner or a staff outing, I can be prepared and not worry.  If you’ve allocated every penny with no wiggle room- it may mean you need to cut your expenses to allow for the natural wiggle room that should occur in any budget.  Having a little bit of breathing room means that your budget won’t suffocate you.

If you have to account for every dollar of income, even a surprise $10 purchase be stressful.  Emotionally, it can be deflating. By allowing yourself some breathing room (between $50-$100 should be sufficient), you can rest easy knowing that you’re ready for anything that comes up.  If you end up not spending that money- you can put it in a special savings account for fun stuff like a new pair of boots or a vacation with family.

It’s not always easy to create this breathing room in your budget if you feel pushed to the max, but it can be a huge stress relief if you find ways to tighten up elsewhere so you can have flexibility later.

 

 

ZINA

4 comments so far.

4 responses to “How Can You Budget For Things That Come Up?”

  1. We have an emergency fund that we dip into when something really expensive pops up – like a home repair. Other than that, I try to budget for birthdays, anniversaries, etc. in our monthly budget. I also have a $200 misc. line item in our zero-sum budget that takes care of the random expenses that pops up. It doesn’t always work perfectly, but it works!

  2. Great tips! I make sure to have a line item called “gifts” for each month. We don’t always use it, but anything extra is rolled over and then we have a larger budget for when the holidays hit. I think I may need to up the budget a bit though – next year is looking like a year of weddings and baby showers! But at least those events I have a little bit of a heads up for 🙂

  3. Michelle says:

    We do the same thing as Holly. For big unexpected expenses we will use our emergency fund, but for everything else we try to budget it in.

  4. Michelle says:

    Thank you for these invaluable tips. It really helped me to think about my finances differently.

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