How To Expect The Expect-The-Unexpected

You diligently track your budget and you try to grow your savings, but somehow you keep getting thrown off course. Maybe this month you got a bill from your doctor’s office that was much higher than you anticipated. And last month you had to replace your broken water heater which made a significant dent in your wallet. Here are some ways you can prevent those unexpected expenses from derailing your financial goals.

Review Last Year’s Spending

There are some expenses that are truly unpredictable, but sometimes what feels like an unexpected expense is really just an irregular expense. It’s easy to account for consistent monthly bills like your mortgage or insurance payments, but it’s trickier to plan for expenses that occur only a few times or once a year. That’s why reviewing your transaction history can be a good guide to help you predict future expenses. Make a note of all the spending you might be overlooking in your budget such as gifts and annual membership fees.

Anticipate Expenses

You might not know which appliance is going to give out on you next, but you can predict that you will have some home maintenance or repairs over the course of a year. As a rule of thumb, you can put away 1% of your home’s value for these expenses. So, if your home is worth $150,000, then you can allocate $1,500 for the year or $125 a month toward home repairs. Similarly for car maintenance and health care costs, you can look at your previous spending to ballpark how much you should set aside for each category every month. Some months you might not need to spend anything in these categories, but try not to touch that money so you’ll have enough when you need to cover a large expense like a new transmission.

Build Your Emergency Fund

Okay, you’ve taken irregular expenses into consideration and anticipated future expenses, but you still might run into some urgent, unforeseen costs. Maybe you’ll need to hop on a plane to take care of an ill loved one or you could abruptly lose your job. This is where an emergency fund comes into play. Experts recommend saving three months’ worth of expenses to help you weather any financial storms. Even if that doesn’t seem practical right now, start by saving what you can. You can even automate your savings by setting up recurring transfers from your checking to yours savings account within Digital Banking. That way you don’t even have to think about it! You can also save up windfalls like tax refunds or work bonuses instead of using them on something more fun like a shopping spree. Plus, you can accelerate your savings growth through other savings options such as a certificate account or money market account.

Put these tips into practice and the next time the mechanic tells you it’s time for a new set of tires or your washing machine breaks down, you’ll breathe a sigh of relief that you know you can cover the expense!