Imagine having someone bash your ‘baby Ferrari’ out of nowhere. Will you love to let your baby cry for long? Of course not. The moment you decide to fix the car is the moment an unexpected expense occurs. That hurts!
In this article, we’ll be showing you handle unexpected expenses: this will help you live in expectation of unexpected expenses such that whenever it comes, you won’t feel the impact. Life itself is unexpected. Live with life!
What Can I Consider As An Unforeseen Expense?
Unexpected expenses are those expenses you did not see coming.
How you deal with an unexpected expense is solely dependent on what kind of expense it is.
For some, you can buy insurance to protect you from the cost. If insurance doesn’t cover everything, you now have to fall back to your emergency fund or utilize our top tips on how to tackle unexpected expenses.
How Can I Deal With Unexpected Expenses
Having a sound money management plan is a beautiful thing to do. As a matter of fact, it is the only way to financial security. But most times we are hit by what we tag ‘mighty unforeseen expenses’. To deal with such a situation is one to plan for and master.
No matter how solid your understanding of finance is, if you fail to plan for unexpected expenses, you will definitely get hit someday.
Our team of financial experts has put together great tried-and-tested strategies of how to manage unexpected expenses in such a way that it doesn’t make your pocket sweat. See them below.
#1. Use your emergency fund
Emergencies make up unexpected expenses. The idea of creating an emergency fund is one that greatly helps you deal with unforeseen expenses. An emergency fund is a particular fund set out of your monthly paycheck for emergencies.
So, you have to ensure that out of everything you earn, there is an emergency fund set aside in a separate account.
According to Jesse Mecham, you should have money put aside in a range of accounts for specific emergencies, such as ‘car repairs’ or ‘house maintenance’. This will enable you to prepare for a specific emergency like a health emergency or car emergency.
#2. Dip into your savings
When emergencies come up, calling on your savings account for aid might not be a bad idea especially when you are assured of your savings.
If you have cash in your savings that you can dip into without penalties, you’re good to go.
Nevertheless, make sure that the money isn’t reserved for another purpose.
#3. Take interest-free credit
Paying through an interest-free credit is one way to tackle unexpected expenses when it arises. For instance, if your car is beyond repair and you need to get a new car, you might be lucky to get a car dealer who’s really to offer you 0% finance to that end.
Nonetheless, only borrow what you can afford.
#4. Borrow from family
Research from the Money Advice Trust has shown that two-thirds (67%) of 18-24-year-olds have borrowed money from their family or friends, with the average borrowing standing at £2,248.
Borrowing from family and friends is one great way to handle unexpected expenses as they might not charge interest on the borrowing. Furthermore, they might be open to a loose repayment strategy.
Just as it is nice for family and friends to have each others’ back in times of need, it is also important you have their financial interest at the back of your mind. Every dime borrowed have to repaid in no due time so as to help their financial prism stay in shape. You can fuse it in your monthly budget so as to stay tuned and committed.
See our top budgeting apps here.
#5. Use a personal loan
If you cant access the required amount of money to tackle an unforeseen circumstance, you can afford to borrow.
Personal loans and credit cards allow you borrow small amounts at a fixed rate of interest for over a fixed repayment period.
A personal loan gives you access to $1,000 up to $25,000 as long as you have a good repayment plan. With different loans available, endeavor to shop around for the best deal.
#6. Credit card
A credit card is an easy way to handle an unexpected bill though it can be quite on the high side.
Interest rates on credit cards can often be in excess of 20%. and if you don’t pay back quickly you can end up paying a significant amount of interest.
This might be the lender of last resort as you are technically spending the money you don’t have.
#7. Sell Some Assets
In terms of emergencies, whatever you feel is an asset that you are willing to trade can go. Look around your house for unused and used electronics, exercise equipment, tools, used furniture, and other items you no longer need or use.
Get them listed on legit platforms as soon as you come and watch offers triple in.
#8. Minimize Your Spending
This might come impulsively to a good number of us out there especially when there’s is a heavy emergency spending. Therefore, try as much as you can to cut down your expenses as much as you can until you get over the financial emergency.
Make meals from pantry staples and food you have in the freezer, look out for coupons and promos to capitalize on like Krispy Kreme student discount, and a whole lot of ongoing promos and ways of earning some extra cash and limiting expenses.
#9. Develop a Strategy to Pay it Off
This can be done even before you secure the loan or use the credit card as long as you have an intended amount. When you develop a workable strategy and stick to it, it will help you avoid racking up interest charges.
#10. Take up Side Hustles
To help raise money to cater for unexpected expenses, it will be wise to take up side hustles like streaming videos to get paid, donating plasma, selling used furniture, selling your old wedding dress, taking up writing gigs, selling your old dress or shoes and a whole lot more.
Through this means, you’ll be able to raise if not all but a reasonable amount to cater for the unexpected.
Unplanned expenses will always come as you cannot escape them. Most times, it might be your fault but you will bear majority of the consequences.
So when it happens, I believe you know the steps to take so as to remain stable.