Even the most thorough household budget can't account for every expense.

What is the best way to include unexpected expenses in your budget?

Creating and sticking with a budget can prevent you from overspending.  But what happens if an important expense crops up that isn’t accounted for in your budget? 

When crecouple making calculations(117696)Credit: Dreamstimeating your budget, make sure to include a line for “miscellaneous.” At some point, an appliance may break or other unforeseen expenses will appear.  Instead of being taken by surprise, plan for these in advance.  When making your budget, make sure to list as many non-monthly expenses as you can: insurance premiums, auto tune-ups, birthday gifts, repairs, etc.

Planning and saving can help prevent the fastballs in everyday life from turning into a crisis. My in-laws have a jar by the washing machine and, every time they do a load, they pay a dollar, earmarked for the inevitable cost of a new machine/repair. 

While financial planners frequently talk about the importance of having an emergency fund in the event of a disability or lost job, consider creating an “anti-emergency fund” to deal with the variable expenses, both expected and unexpected, that inevitably occur.  This fund can either be a separate account, or a line item in your budget.  If you budget for repairs and then don’t need them, then the cash can cushion your account. 

When creating financial plans with clients, I ask about future anticipated expenses.  Frequently clients mention a planned vacation, wedding bills, and the like.  However, I’m told much less frequently, “replace car in 10 years” or “prepare to replace old appliances in three years.”  No one can predict when your car will break down, but it’s easy to know when your next regular tune-up will be … and the price tag for that can easily surpass your grocery bill! Knowing large expenses in advance helps meeting the financial obligations easier. 

Especially in times of economic uncertainty it’s important to stick to your budget and maintain savings. To understand make sure your budget stays on track, make sure you have an emergency fund to help you cover unexpected expenses.


Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.