Dreading your next set of unexpected expenses? Here’s what to do.
We were running late for school. I hustled the kids to the car (“Tie your shoes in the van!”), slammed the door, jumped in, and turned the key.
The tire light came on.
Should I get out and look? That stupid light comes on all the time, and it’s always just a tire slightly low on air. I don’t have time for that.
But I know it’s going to nag at me all the way down the road. So I jump out to ease my mind before we rush to school. Except that this time, I actually have a totally flat tire.
Unexpected expenses are called that for a reason. They pop up out of the blue, and they are never a cheap fix. In fact, they are so likely to happen that they should be expected.
Even if you’re living debt free, most of us are just one or two unexpected expenses away from falling into debt. And if you already owe money, unexpected expenses can put you into a never-ending cycle of bills.
Let’s look at 4 ways unexpected expenses are the key to being debt free.
1. You Keep Putting Them on Your Credit Card
Each time an unusual bill pops up, we’re tempted to just throw it on the credit card and deal with it later. But before you know it, there’s another expense and you still haven’t paid off the first one.
2. You Don’t Have a Budget
If you keep getting hit with bills you weren’t prepared for, it’s usually a sign that you have no budget. Or the one you’re using isn’t working. It’s time to look at it again and find a way to add another line item for an emergency fund.
3. You Panic-And Then You Spend More
How often do you get hit with a bill that you can’t afford, and it causes you to give up on your spending plan altogether? “If I’m going to put this on the credit card, I might as well treat myself to that while I’m at it.” That attitude will keep you in debt forever.
4. You Don’t Expect the Unexpected
We don’t know when these expenses are going to hit, or what they will look like. But you can bet your boots that unexpected events are coming.
This is why Grandma told you to save up a rainy day fund.
What’s the fix?
When you have an emergency in your life, the last thing you need to worry about is how you will pay for it. In fact, most of us will use the quickest and easiest method of dealing with the bill. At the time, the bigger worry is solving the problem.
Sometimes that means credit card debt. Other times it’s payments that stretch out for years.
Neither of those options will help you get out of debt.
Do you have an emergency fund?
An emergency fund is not a savings account that you raid when you need to make a big purchase or cover a few extra bills. This money should be set aside just for unexpected expenses you couldn’t have foreseen.
A broken bone. A car wreck. Getting laid off or asked to go on furlough.
These are true emergencies. An unexpected expense such as one of these would be the reason to dip into your emergency fund.
How do you pull it together?
Dave Ramsey sometimes catches flack for putting a small emergency fund as his first baby step. But it’s so important! Pull together $1,000 (or $500 if $1,000 seems totally unmanageable). This is your emergency fund. This is what you draw from when the unexpected hits you.
To do this, I recommend you drop all your debt payments and bill payments down to the bare minimum. If you’ve been trying to throw extra at your debt to pay it off quickly, pay yourself first instead. Are you spending an extra $2.64 on your mortgage payment to round it to an even number? (I know I’m not the only one!) Stop doing that for now. Put that little bit in savings, too.
If you have to take a side job or an odd job here and there, do it. Today. Your future self (the one too busy dealing with the emergency to get a side job) will thank you.
Get control over your unexpected expenses, and you’ll finally reach your goal of being debt free.
How do you handle unexpected expenses?