They say that, in life, the unexpected happens when you're busy making other plans. Unfortunately, however well you budget, real life has a way of giving you a wake-up call in the form of unexpected expenses. For instance, when your boiler breaks down or your new puppy eats something they shouldn't have, the budget goes out of the window.
It's impossible to predict when the worst will happen, but you can plan for it. The problem is that disaster often strikes when your income is already stretched. So what counts as unexpected expenses? And what can you do to make sure you can weather an emergency and be prepared for next time?
In this article, we'll look at your options when dealing with unexpected expenses. Read on for our top tips on getting back to good financial health.
Examples of unexpected expenses
Unlike annual bills that you can budget for, unexpected expenses are things that take you by surprise. For example, you know your MOT is due every year, so you can save for that. On the other hand, it's impossible to predict when disaster will strike, such as your car breaking down.
- Unexpected expenses are things like:
- Your boiler or washing machine breaking down
- Your pet being involved in an accident or falling ill
- Your roof springs a leak requiring major home repairs
- A one-off life event, for example, travelling to attend a funeral
While many of these things are unavoidable, there are some ways that you can ease the financial strain. There are several different strategies to deal with unexpected expenses, from setting up an emergency fund to taking preventative action. Find what's right for you and your final bill won’t be too shocking.
How to deal with unexpected expenses
Dealing with unexpected expenses can be stressful and challenging. In a report from the Money Advisory Service, 26% of working-age adults didn't have sufficient funds to fall back on in an emergency.
There are several options to help you get through an emergency and get back on a sound financial footing. So what's the best way to pay for unplanned expenses? These tips should help you meet those unforeseen expenses when they arrive...
Have an emergency fund
You can’t predict when an emergency will strike, but we all know that our home or car needs regular repairs and maintenance.
Setting up a fund for unexpected bills or boiler repairs is a sound strategy to be prepared. The usual rule of thumb is to put aside enough money to cover three months worth of bills. It's also a good idea to specifically put money aside in different pots for named emergencies. For example, you're far less likely to raid an account set aside for car repairs if the roof starts to leak.
Re-budget to cut your spending
Having cash savings to fall back on is always a good idea. But if you're struggling to save, you may need to take a look at your budget so you can trim any unnecessary spending.
That could mean cutting out a takeaway a week or switching out one of your streaming services. Get creative with ways to cut back without missing out, and the end result will mean you're in much better shape to weather unexpected expenses.
Sell your stuff
It's never been easier to earn money by selling your unwanted clothes and clutter. There's a range of eCommerce and auction sites that will help you get rid of everything from last summer's wardrobe to that unwanted Christmas present. You could even swap your unwanted items for things you need or sell for a profit using local groups.
Generate extra income
Rather than taking on a second job, look for opportunities to earn some extra income online in your free time. Focus groups and surveys are one way to supplement your income. But you could also create a side project based on your talents and hobbies or generate some passive income.
Skip a planned expenditure
You might be saving for the trip of a lifetime or a down payment for your first home. But your unexpected expenses now might be more important than your future plans. Reorganising your priorities will mean your bills get paid, and you're in better financial health for the future.
Borrow from your family
A family member rarely charges you interest when they lend you money, making this a cheap and appealing borrowing option. However, unless you keep to some sort of repayment schedule, it can have serious consequences. Debt Charity Step Change reports that one in three families has suffered negatively due to borrowing from loved ones.
Borrow with caution if you go down this route.
Using low or zero percent borrowing
If you can get a 0% credit card or overdraft, then it can be a great way to deal with that unexpected bill. Of course, you'll need to repay within the 0% window; otherwise, you could find yourself paying a high rate of interest and getting into zombie debt. Sometimes short term debt is unavoidable, but try and avoid payday loans with huge rates of interest.
Take out a personal loan
Personal loans can be a good way to borrow a small amount over a fixed period of time. An unsecured personal loan lets you borrow a smaller amount of money without putting assets like your home at risk.
If you need to borrow more, then you may need to take out a secured loan. Comparison websites are your friend when you're looking to find the best deal. And always do your maths and choose a fixed-rate loan if you want to be able to budget for a single payment every month.
Examples of how to deal with unexpected expenses
We've looked at some common examples where unexpected expenses are unavoidable with tips on how to deal with them:
Major household repairs
If you own your own home, it's guaranteed to cost you money.
How to prevent the problem: You can help to prevent big problems by undertaking routine maintenance jobs yourself. If you need more extensive work done, get three quotes from builders and ask friends and family for recommendations. And make sure you get the best home insurance you can afford and keep up with the repayments.
How to deal with the problem: One rule is to put aside 1% of your income every year for a house repairs and maintenance fund. But if you've just moved in and the boiler breaks down, you're liable to have to dip into your emergency fund or get a loan.
Having your car repaired doesn't come cheap. Car repairs cost us on average £142 per year, making them one of the most significant unexpected expenses most households face.
How to prevent the problem: Regular servicing will pick up on minor niggles that can become big problems. You could also try car-sharing, so you drive less often. And driving carefully when you are behind the wheel can help you to reduce your petrol and insurance costs.
Fully comprehensive car insurance will cover you in the case of an accident, so shop around for the best deal and never drive without insurance.
How to deal with the problem: If you face an unexpected breakdown and need help covering expensive repairs, you could consider getting a Salad Money loan if you’re an NHS or public sector worker.
We know a car is a lifeline for many public sector workers. That's why we offer fair and affordable loans to help you cover all those unexpected expenses and get back on your feet fast. Apply online to find out how we can help you out in a financial crisis.