It’s like Murphy’s Law: just when you think you’ve got your finances in order and a little extra cash in the bank—boom. An unexpected expense wreaks havoc on your bottom line. Help protect your family budget from these unpleasant surprises by thinking and saving ahead.
If we’ve learned anything in the United States in the last couple of years, it’s that almost no one is immune from the effects of a severe economic downturn. Some families are hit hard with a job loss or mortgage foreclosure, while others are forced to tighten their belts and adjust discretionary spending to handle a decrease in cash flow. Whatever your financial condition, it pays to prepare for these 9 Unexpected Financial Biggies.
1. Car Repair.
That funny noise under the hood might require a new $20 belt, or it may mean a major repair costing hundreds of dollars. As your car ages, set aside a little extra cash for just such a “rainy day.” You can also protect yourself from disastrous repair bills by having your car serviced regularly.
2. Car Replacement.
Some drivers are able to stretch the life of their vehicle for 10 years or more, but they all need to be replaced eventually. Sit down with your budget and forecast when that will need to happen, and make a plan for paying for it. (Tip: if you can save up for a larger down payment or the full purchase price before time to buy, you’ll save thousands in interest!)
3. Home Maintenance and Repair.
Most real estate experts recommend that buyers budget 1-2% of the cost of their home for annual maintenance and repairs. That means that for a $100,000 home, you should expect to spend $1,000-$2,000 annually. While that sounds high, take into consideration that a single repair like a new roof on a 1500 square foot home can cost between $4,000-$9,000. So while you may get away with spending nothing for a few years, when the major items demand attention, you’ve got to be ready.
4. Auto Insurance for Teens.
Congratulations! Your 16-year-old just got her license! Bad news? Your insurance just went up. If you’re adding her to your policy as an extra driver on your car, the increase will likely be minimal. If she gets her own car, it could be much more.
Those beautiful smiles that are so common today come at a price. Orthodontic care varies in price based upon the complexity of the case, but most patients can expect to spend at least $3,000. Don’t assume that you have until junior high to get ready for this expense. Many practitioners are recommending what they call “phased treatment” these days, which takes advantage of your child’s natural growth spurts to correct certain problems.
6. Disability or Job Loss.
If your family’s livelihood depends entirely on the income of one person, have you considered what may happen if he or she could no longer work? Some families have life insurance that would compensate if the bread-winner suddenly died, but what if he became permanently disabled as a result of an accident or illness? Disability insurance can provide income in these circumstances, and can save your family from financial ruin during what is an already difficult season.
A new washing machine can easily cost $1,000 and larger appliances even more. Keep a little emergency money handy for these purchases, especially if one or more of the appliances in your home is near the end of its life span.
It’s the elephant in the room of modern financial planning. While it’s not exactly “unexpected” (we see it coming like a slow-moving train for 18 years), many families postpone saving for college expenses until it’s just too late. Our best advice: don’t be so paralyzed by the daunting numbers that you figure it’s useless and do nothing. Save what you can, even if it’s minimal, from the time your children are small. You can also encourage generous relatives to donate to your child’s college fund for birthdays and Christmas.
This may be the last “official” parental financial responsibility, but it’s a doozie! According to wedding gurus, the average event costs around $27,000 these days with that number going higher in urban areas. Also, well before the question is popped, make a point to communicate with your children about what you think are reasonable expectations for such an event. That way they can plan to pay the extra costs if they desire a more lavish affair than for that which you’re willing to pay.