Unplanned expenses are an inevitable part of life, and no matter how many times we hear about this happening to other people, it’s still a huge shock to the system when it happens to us. Whether it’s a car repair, a medical emergency, or an unexpectedly high electricity bill, these costs can easily derail even the most carefully planned budget, not to mention, steal from your peace of mind. 

The good news is that you can navigate your way through these unexpected and unpleasant financial bombs with a little proactive financial planning. Armed with the right know-how, you’ll be able to resist the urge to panic and unintentionally cause yourself more harm by wracking up further debt with the wrong solution. You’re also more likely to make it through to the other side – without even compromising your long-term savings goals. 

Here are a few pointers to help you manage those unplanned expenses, without breaking your budget. 

Avoid Using Credit Cards For Emergencies 

A credit card can offer a convenient solution to help you tackle an out-of-the-blue cost that needs to be dealt with immediately. That said, a credit card shouldn’t be your first line of defence. The main reason is because of the high-interest rates associated with credit cards, which can lead to long-term debt. Especially if the balance isn’t cleared promptly.  

Now, what if you have no option? Well, in that case, do so knowing that in order to avoid the excessive interest burning a hole in your budget you will need to adjust your budget to repay the amount quickly. Hopefully, you’ll be able to maintain your financial stability and protect your credit score. 

Accommodate Emergencies 

Let’s say that you’re faced with a car repair that needs to happen immediately, so that you can have use of your vehicle as soon as possible. In this case, the first thing to do is to revisit your budget immediately so that you can quickly identify non-essential areas where you can reduce spending.  

For example, if you had planned on dining out, then cancel these plans to take the pressure off. If there are birthday parties on the horizon, make the gifts instead of spending on store-bought items. Thankfully, when the emergency cost is covered, you can put date night back on the table.  

Get Proactive 

It’s never too late to start one of these savings pockets, and the reality is, building an emergency fund is easily the best way to get proactive and protect your financial stability.  

Essentially, an emergency fund is a savings reserve that you specifically build and set aside for unexpected events. According to the financial experts, it’s recommended that you aim to save at least three to six months’ worth of essential expenses. If that seems too high, then aim for a lower amount. Having a smaller goal will still make a big difference if you encounter sudden costs.  

Our parting advice on this tip is to keep this ‘rainy day’ money in a high-interest savings account to ensure that it remains accessible while also earning some interest over time. 

A Seasonal Look Ahead 

Not all “unplanned” expenses are truly unforeseen. For example, we all know that in winter we’re likely to use more power and so we should expect a higher electricity bill. We also know that the festive season is in December, and so these extra costs (treats, holidays, gifts, etc.) should also be somewhat anticipated. Worse, we’re all taken by surprise every January when the money has run out by the end of the first week and we’re scrambling to make do. 

The best thing you can do is to sit down with a planner, either on your phone or a nice printed one to stick up in the kitchen so that you can plot these seasonal expenses over a year. By dividing these predictable expenses across 12 months, you can build a buffer each month to prevent financial strain when they arise.  

Make Saving A Habit 

Establishing good financial habits, such as saving every month, will make it that much easier to handle unplanned expenses. It may seem daunting, but even small, consistent savings can accumulate into a meaningful emergency fund over time. 

Feeling informed?  

You can’t prevent unplanned expenses from occurring, that’s just a fact. But you can take steps to manage them effectively and stop them from derailing your financial progress. 

Don’t forget that AA Inform is home to a range of useful financial tools and resources that can assist you along the way, including access to our Monthly Personal Budget Calculator, which provides you with an excellent way to keep track of your finances and help you live within your means.