Planning for Those Unexpected Expenses

Planning for Those Unexpected Expenses

Jun 24, 2016 | Quitting your 9-5 | 2 comments

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Predictability

I’m reminded each year during the summer of how hot it gets here in the desert of Las Vegas. Sometimes there is nothing that will prepare you for the heat wave that is equivalent to you opening an oven every day and walking into it.

I’m sure there are hotter places on earth, but after 30 years, I’m still not used to it.

However, there are lots of things we can do or already do to prepare for the summer here. Some people just up and leave and head to the mountains or another state where the heat isn’t so brutal. Other’s make sure their house or apartment faces a certain direction so it’s not so costly to cool down the home with AC. But I still find it funny that we can be completely unprepared for the heat wave even though it comes every year.

The same thing happens to our budget almost every season.

Create Awareness

Similar to the recurrence of summer, there are a number of expenses on demand that we’ll encounter when attempting to maintain a budget. We have our normal monthly or bi-weekly budget that repeats each period but there is always an item that hits us unexpectedly even though it’s easy to plan for and we’ve paid for it before.

i’m not talking about emergencies or deciding to buy a new toy or randomly deciding to eat dinner out one night. This is a recurring expense that comes up so seldom, that we forget it even exists until it hits us and we’re stuck pulling from a tight budget to pay for it.

I call these unexpected expenses.

These expenses demand our attention immediately and often surprise us. What has worked well for us is to make a list of these items and detail the dates and times that these expenses are due.

For example, every year we need to register our vehicles. Our vehicles, being the high mileage cars they are, cost around $200-$300 a year to register. Now, we can either wait until December and fish around for spare quarters under our car floor mats to pay the bill or we can say, “Enough of these surprise expenses!” and plan for it in advance.

How do we do that?

Well let’s think about it. Let’s say it’s already January, you’ve pulled from your savings or emergency fund to pay for the car registrations and now you have to replenish a portion of your savings.

Great, now we can forget about it, right?

Wrong. You now have twelve whole months to pay for this year’s registration.

$200 a year over 12 months and 24 pay periods comes out to $8.33 per pay period. Is it easier to put away $8.33 in cash each pay period rather than to come up with the full $200 at the end of the year?

I know you may think, “big deal, $200 bucks, just pay for it,” but let’s make a little list of these occurrences and see what we think then.

Read also: The Budgeting 101: How to Start From Scratch blog post.

  • Cost of unexpected expenses per pay period:
  • Car Registration each year (2 vehicles) $8.33
  • Tires for 2 Vehicles every 6 years $6.25
  • 2 Smart Phones every 2 years (non-subsidized) $35.42
  • Yearly Gym Membership (cheaper paid yearly) $15
  • Vacation Yearly $83.33
  • Auto Repairs/Maintenance Yearly $40
  • Car Replacement 5-10 years $200
  • New Computer 3-5 years $27.78
  • Furniture Yearly $85
  • Amazon Prime $4.16

Total additional expenses on demand per pay period: $505.27 (based on 24 pay periods)

Yeah, you’re reading that correctly.

That measly $200 a year has now grown to an extra $500 per pay period that we need to save for these expenses! That seems a little crazy right?

We could probably remove or reduce the cost of some of these but for the most part, these are all future expenses that we need to consider in the long run to maintain a healthy budget that isn’t constantly being broken by some unexpected but predictable expense.

Compartmentalize

I love the analogy Mark Gungor uses when talking about how different men and women’s brains are.
Men compartmentalize by putting every little detail we think about into tiny little boxes. None of the boxes touch each other.

Women on the other hand, their brain is a wire mesh of inter-connectivity where everything affects everything else. Well ladies, if you are the one who handles the budget, we’ll have to figure out how to compartmentalize at least this one time.

If you’re an old school money guy like me, get an envelope system. Set it up with labels and label each and every unexpectedly predictable expense. Add money to each envelope in a way that works for you; each pay period, bi-weekly, monthly etc.

Read also: The post on How Budgeting with Cash Can Save You Thousands.

The freedom and joy that this preparation can bring to you when that expense finally hits will be palpable. You’ll wake up one morning and think…”Oh man, that crazy bill is due today!” and then you’ll look at your envelope and…

BOOM!

The money is already set aside, and you don’t have to take from your savings, your emergency fund, or you kids birthday money.

As a side benefit your kids will love you for that.

What are some other unexpected expenses that you’ve found that you were able to prepare ahead of time for? Let me know in the comments below.

Being disciplined with your money is hard but trust me, it's worth it. -Brandon

Being disciplined with your money is hard but trust me, it's worth it. -Brandon

I’m Brandon and that’s my bride Ariana and our first born. We listened to age-old wisdom and paid off over $100,000 in debt from college, credit cards, vehicles and an underwater mortgage in under two years. We now we live a debt free life. Now we’re able to spend more time at home with our kids and prioritize our life.

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2 Comments

  1. dominique

    Great stuff. The beginning of this month was my step-dad’s birthday and when my sister text me asking to go halfsies on a new hammock for him, I had a rush of panic…followed by an immediate rush of relief as I remembered I had begun a “gift fund” more recently and would be able to use that. We have to keep ALL expenses in mind, not just the monthly re-occurring ones. Thanks for sharing!

    Reply
    • Admin

      This is so true! It can be very irritating when someone puts pressure on us to make a purchase; an unplanned purchase and large at that! I’m glad you were prepared, it’s a great feeling!

      Reply

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