No one likes surprises, especially when it comes to their finances. Whether you’re preparing your home for sale or simply trying to be more mindful of your spending, it’s always a good idea to have a plan for unexpected expenses. Here’s a detailed guide on how to do just that.
Make a Budget
The first step to preparing for unexpected expenses is to create a budget. This will help you get a clear picture of your income and expenses so you can see where you can cut back if need be. To make things easier, download a budgeting app like Mint or You Need a Budget (YNAB).
Have an Emergency Fund
Unexpected expenses are, well, unexpected. That’s why it’s important to have an emergency fund set aside specifically for these types of occasions. A good rule of thumb is to have 3-6 months’ worth of living expenses saved up. This may seem like a lot, but it’ll be worth it when an unexpected expense pops up and you’re able to cover it without going into debt.
Cut Back on Discretionary Spending
If you find yourself with some extra cash each month, consider putting it into your emergency fund instead of blowing it on unnecessary things. Cutting back on discretionary spending, such as eating out or buying new clothes, can free up a lot of money over time that can be put towards savings or investments.
Invest in Yourself
Investing in yourself is one of the best ways to prepare for unexpected expenses. By taking courses and learning new skills, you’ll be better equipped to handle whatever life throws your way. Not only that, but you may even be able to make some extra money by teaching others what you’ve learned!
Insurance is another important way to protect yourself from unexpected financial burdens. Health insurance, in particular, is essential in case you or a family member gets sick or injured and racks up a hefty medical bill. Even if you’re healthy now, it’s always better to be safe than sorry!
Take these tips on-board today
While there’s no way to completely avoid unexpected expenses, there are some steps you can take to prepare for them financially. By creating a budget, saving up an emergency fund, and investing in yourself, you’ll be well on your way to being prepared for whatever life throws your way. And remember – getting insurance is always a good idea. Good luck!