How Safe are Your Plans from Unexpected Expenses?

This post is super-important.

If you can embrace the concept of financial readiness, I believe you can achieve any reasonable financial goal that you set.

The problem is that we’re lying to ourselves.

We design our budgets, set up our goals and live out our financial lives with the expectations that the world is at our mercy.

Sooner or later, odds catch up with us and we realize that things will never go as planned. In one area or another, things happen that put a huge strain on our money.

Where We Stray

With practice, I’ve learned to laser-point these unexpected areas in my own life. It’s likely that I share most of the categories with you.

Three years ago, I identified four such areas. Since then, my respect for these expenses has exploded, and I’ve added a few to the list.

There are a few key reasons why becoming the master of the unexpected expense is key to success:

  • Unforeseen expenses are those most likely to put us in debt.
  • They are most likely to stall progress toward our saving goals.
  • They demotivate us from positive action like nothing else. Think two steps forward, one step back.
  • They are high-stress and low-reward*.

*Unlike things like shopping or entertainment, no one I know gets a thrill from fixing a flat tire or an ER visit.

A Better Way

There is a better way, though it’s not as sexy.

It means that you have to accept imperfection. It means that you have to be reasonably ready for upcoming expenses.

Most importantly, you have to let go of the idea that every penny past your basic needs can be stashed away forever, rerouted to pay off debt, or otherwise participate in whatever perfect strategy you’ve designed.

Some people call this the life happens concept. Expecting the unexpected. I call it: It’s always more than you think. 

You just have to be ready. Stop pretending these expenses don’t exist. Stop pretending it won’t happen to you. The worst-case scenario is that you save too much, which is a decent problem to have.

8 Areas to Watch

There are 8 key areas in your budget that need close attention. With experience, it’s possible to budget realistically for most of these:

(1) Car Repairs: We tend to consistently underestimate the amount of money it takes to maintain a car. Based on my experience, cars fail consistently (but always at the worst time), repairs are more expensive than we expect, and small problems left untreated become nightmares. One rule-of-thumb we use is to save 1/2 the amount of a typical car payment for repairs, though even that can quickly fall short.

(2) Gifts: Yearly birthdays and holidays arrive like clockwork, yet we still fail to plan for them. There are also many unexpected parties and events that we get invited to throughout the year. Instead of taking joy in gifting to others, it becomes a stressful experience.

(3) Things that Break: Tools, appliances, electronics, housewares, furnishings, and almost anything else you buy is subject to damage, destruction, or failure (especially if you have pets or kids). The more expensive your taste, and the more damage-prone your family, the more savings you should expect to have ready.

(4) Health Care: Nobody wants to think about sickness or injury, but the odds are that you will eventually need medical care. The last decade has seen a half dozen trips to the ER and countless doctor’s visits within our small family, and someone’s got to pay for it all. Thankfully, health costs are among the few unexpected expenses than can be paid for tax-free.

(5) Seasonal Expenses: Mid-September through early January is a jam-packed time for our family, with about 15 different birthdays, anniversaries, holidays, and other events. To ignore this throughout the rest of the year would be foolish, and would only add needless stress to a time already filled with enough demands.

(6) Veterinary Expenses: Pet owners, beware. You might own the healthiest animal on earth, but even he or she will eventually become sick and pass away. As society becomes more pet-centric, there is increasing pressure to spend huge sums of money on keeping our pets in tip-top shape.

(7) Vacations: You might be wondering why a discretionary expense made the list of unexpected costs. There are two reasons: most people plan vacations first and budget later, and the cost of a vacation tends to escalate quickly during the actual trip. For both reasons, we need to plan and buffer vacations before we take them.

(8) Life: It happens. What it is, I can’t tell you, and that’s exactly the point–there are things which the most thorough planning and careful living simply won’t predict. The key idea to remember is that when you-know-what hits the fan, it’s good to have a bit of cash on hand to deal with it.


Master this idea, and you will create a well-oiled machine that stops for almost nothing. You will maintain momentum through the unexpected ups and downs of daily life.

We are still far from this ideal ourselves. Part of the reason is the required budget space before this level of readiness is achievable.

But it is an ideal to strive for, and I encourage all of you to consider it Priority #1 if you want to get ahead financially!

(photo credit)

One thought on “How Safe are Your Plans from Unexpected Expenses?

  1. Here’s another reason to have a great cash reserve emergency fund with direct deposit into it. Because these expenses you list are uneven, it helps keep your plan momentum in place.

    I love this list! When I was a financial advisor, these were the highlights I saw people underestimate constantly (especially gifts).

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