Expect the unexpected. This is a motto that lots of people live by. But it’s a given that, no matter how prepared you think you might be, financial hardships can often catch us off guard. Unexpected expenses come about for a variety of reasons, from illness or injury to car or house repairs. These expenses are different than the regular payments that we have time to prepare for, such as medical checkups, utility bills, or transportation costs. Sometimes, things happen and there is no way to plan for them, but there is always a way to manage them properly. Here are some effective ways to handle unexpected expenses.
Budget Planning
Creating and sticking to a budget is always the first step to control your spending and know where your money is going. Knowing where your money is going is easier than trying to budget for the unknown, but the latter isn’t that difficult. Look at your yearly budget, and you will find where most of your unexpected expenses might pop up. For instance, exceptionally cold winters might raise your utility bills. Car repair is another common, but an unfavorable event. Also, look at the vacations you took over the year, and if you have kids, see where most of their spending is going.
When you do this, you will be able to better identify where and even when expenses will pop up. Say, for example, last year you paid $2,000 in extra expenses. Divide this number by your monthly earnings. This will probably be around $166 that you should set aside for unforeseen future expenses. If it’s too much to put aside, then start with an amount more doable for you, like $50, and work your way up as it starts becoming a habit to put away money for emergencies.
Financial Loans
Loans can be taken out anytime, and they are practically made for unexpected events. The best candidates for loans are people who do have a monthly source of income and can pay back the loan according to the terms of the lender. There are different loans you can take out, such as personal loans or payday loans. The difference between the two is that a payday loan is a very short-term loan that you can pay back once your salary comes in. Many people don’t know that getting a loan isn’t as difficult or as complicated as they might think. Most payday lenders in Singapore, Canada, and other countries around the world can offer you a flexible plan that suits you. Also, the screening for a payday loan isn’t very strict and most of the time you don’t have to put up collateral. However, you should keep in mind that payday loans typically offer a much smaller amount of money than personal loans.
Line of Credit
A line of credit works like a credit card with a limited amount of money and lower interest rates than a credit card. As long as the line remains open, you can re-borrow each time you pay the money back. To get a line of credit, you need to have a good credit score of around 700, and the ability to pay back the borrowed money on time.
Check for Alternatives
Almost any unexpected expense has alternative prices. For instance, we know a major home repair or sudden trip takes a big chunk out of your bank account. Finding affordable services that suit your budget needs some searching around. There are always better deals somewhere, and there are always companies that provide a more affordable service than others. Besides finding cheaper alternatives, you should also make wiser choices. If you can drive instead of fly to an unexpected event, that might save you some money. If you can stay with a friend rather than a hotel, this will also help you. You can’t stop something unexpected, but you can make better decisions when it does happen.
Cut Back on Non-Essential Spending
It only makes sense to curb your spending until the unforeseen expense is paid off. If you’ve been saving for something, this might be the time to dip into those savings. As long as those savings were for a non-essential item, then there’s not much harm done if you have to spend it now.
Everyone has experienced some type of emergency that brought about unexpected expenses. Such incidents can put a wrench in your finances, but it’s always best to deal with them right away. There are good loan options that work quickly and securely to get your money when you need it most. There are also different alternatives and small changes you can make to help you be prepared for the unexpected.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
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