Wednesday, October 11, 2017

The Worst Surprise: Coping With An Unexpected Bill

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You’re probably familiar with finding room in your budget for all the standard bills, such as those for heating or the cost of your cellphone, but what about surprise bills? The unexpected demands for money that hold the potential to absolutely destroy your budget; the most unwelcome surprises that any of us have to deal with. Things like:


  • An unexpected healthcare expense,
  • A large kitchen appliance breaking down,
  • Suddenly having to fund a school trip that you weren’t expecting


And so on and so forth; expenses that you’re unprepared for. If they hit you at the wrong time, they can push your budget to breaking point.


Coping with these unpleasant surprises is a key part of your overall financial strategy. So rather than panicking the next time you’re hit with an unexpected expense, deal with it calmly by utilizing these strategies for the future.


#1 - Create A Contingency In Your Budget


If you budget every cent of your income, then that might seem like a good idea-- many people are proud of their “zero budgeting”. However, there’s a downside to this tactic. If there’s no slack in your budget, then you’re always going to be hurt by a surprise expense.


So, you have to build the surprises into your budget. How is that possible, when you don’t know what they are? It’s simple: your budget needs a contingency section. This is an amount of money you set aside every month to pay for those surprise bills and expenses. If you don’t need to use this amount, then that’s fine; you can treat yourself, or you can let the contingency funds mount up for future use. The most important thing is that you get into the habit of running a contingency; it will make coping with unexpected costs so much easier.


#2 - Examine Your Warranty Options


When large electrical goods breakdown, you know that you’re going to be looking at a serious financial expense. It would probably take most families a long time to build up a contingency big enough to be able to, for example, unexpectedly replace their fridge or main TV.


There are solutions to this problem, thankfully. You may find that house warranties could be a good option for you, as these offer a level of protection against standard wear and tear on your household appliances. You pay a small amount per month and, in exchange, you can be sure of a repair or replacement in the event that something goes wrong with an appliance or household object. This choice is particularly useful if your contingency section of your budget is relatively small; warranties ensure you’re covered for the length of time it takes you to build that contingency fund up to a substantial level.


#3 - Always Have A Backup


For major household items, it’s wise to have a backup option in case of unexpected failure. Use sales periods like Black Friday as a chance to stock up on various household goods, then store them away, ready to be pressed into service if your existing item is suddenly rendered unusable. This is a great way of ensuring you’re always buying items for a great price, thus making your budget go that little bit further. A backup iron, hairdryer, and vacuum cleaner are a good place to start.

Those unexpected bills and expenses will always surprise you. However, by applying the ideas used above, you can be sure you’ll always be able to cope with the demands on your finances.

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