Preparing for Unexpected Expenses

Unexpected expenses might reduce the effectiveness of even the best budget. Perhaps your car broke down, or maybe you have a surprise medical bill. While these expenses are a part of life, many people don’t adequately prepare for them. Luckily, you can do a few things to ensure you have enough to cover the bill without going into debt.

Reduce Your Monthly Expenses

One of the best ways of ensuring you have enough money is to live below your means. That means you aren’t spending as much as you make, giving you a bit of wiggle room. You’ll want to go over your expenses, including medical bills, credit card statements, receipts, and everything else. Then you can tally up what you are spending and find ways to reduce that. If you have debt, including student loans, you’ll want to look for ways of dealing with that. One way of reducing your monthly payments is through consolidation, which might give you a lower interest rate. You can use a student loan consolidation calculator to determine how much you might save.

You may try to reduce variables, which are bills that aren’t the same each month. That includes transportation and utility bills. You could try leaving the furnace at a lower temperature during the winter, or you could try carpooling to avoid high gas bills. You’ll also want to reduce discretionary expenses, which are things that are nice to have, but you might not need. You could skip a weekly manicure or a daily cup of coffee. Instead, you may choose to do your nails at home and make your coffee.

Bring in More Funds

If you have a tight budget and have already cut down your expense as much as you can, you might try to bring in extra funds. You could pick up more hours at work, or you could offer to babysit. If you have different things you no longer need at home, such as clothing, you may try selling them at a consignment shop. And if you have a hobby, you might look for ways of turning that into a side hustle.

Using Your Credit Card

If you have an expense pop up, you could try charging it on your credit card. It should be a last resort, but it enables you to cover the cost. Hopefully, you will be able to pay the credit card bill in full once it is due. But one downside is that it might be costly to carry the balance if you find you can’t afford the bill. That’s because you’ll have to cover interest charges, and your credit score might suffer.

Getting Your Budget Back on Track

After an unexpected expense, you’ll want to get your finances back in order. Then you can focus on getting a better credit score and ensuring you have enough funds in the back. To start, go over your budget again. You could track your monthly spending, comparing your budget to your actual expenditures. Maybe you spend too much going out to eat or shopping online. Ensure you have an accurate and thorough budget to cover your expenses easily.

This article deos not necessarily reflect the opinions of the editors or the management of EconoTimes