Budgeting and saving money isn’t easy. It would be a lot easier, though, if we could always predict our future income and expenses! What makes budgeting especially difficult is the uncertainties. We don’t know if and when we’ll lose our job, or if and when we’ll be dealing with traffic tickets, sudden repair needs for our house or car, or a sudden medical expense.
But there are ways to handle these stressful events. The best way, of course, is to prepare ahead of time. But even if it’s too late for that, it’s not too late to make the best of your financial situation.
Preparing for sudden expenses
You can’t predict when sudden expenses will arise, why they’ll hit you, or how much money you’ll need. But you can predict that you will face some kind of sudden expense at some point in the future. After all, how many of us are lucky enough to avoid every kind of problem with our home, our health, our cars, and other important and potentially costly things?
The smart thing to do is to assume these types of expenses could strike at any time, and to take reasonable steps ahead of time to insulate yourself from the worst consequences of sudden expenses. The two big ways to do this are with an emergency fund and with insurance.
An emergency fund is just a stash of money that you have in a place you can easily get it back out of (without financial penalties): in your bank or credit union account, for instance, rather than in an IRA. Of course, saving money isn’t easy, but it’s a lot easier to save bit by bit over a long period of time than it is to try to scrounge up all of that money at once in an emergency situation!
The other great way to prepare for big expenses is insurance. Like saving, this is will cost you a bit in the short-term. But if you can find a way to afford small insurance payments, you’ll be better insulated from disastrous short-term expenses. You can get insurance for almost anything, from dental insurance for dentistry and orthodontics to homeowner’s insurance for house fires and home invasions.
Managing sudden expenses when you’re unprepared
Of course, sometimes it’s too late to talk about what we should have done to prepare for sudden expenses. The sudden expenses are here, and we need to know what to do now!
The first thing to know is that you’re going to be targeted by some unsavory people. When we’re in dire financial straits, we are more likely to take risks and try desperate solutions. So beware of exploitative “solutions” like payday loans and too-good-to-be-true debt consolidation services. Instead, focus on legitimate solutions. Some – like bankruptcy – may sound less appealing than the too-good-to-be-true options, but you need real answers, not phony scams.
Speak to experts, like bankruptcy attorneys. You may be able to shift credit card debt to a new card with a lower rate to buy yourself time. You may be able to halt foreclosure proceedings by declaring bankruptcy. There are ways to weather financial storms, so take heart, and speak to trustworthy professionals.