It’s only a matter of time before it happens. Your car’s transmission breaks down when your daughter needs braces and your washing machine gives up the ghost. These are all unexpected expenses we deal with throughout our lives.
When life throws a financial wrench in your plans, it’s best to be as prepared as possible. Do your best to anticipate upcoming expenses. If you drive an older car or your dishwasher is past its prime, start saving to replace the appliance. You might also want to keep an eye out for great deals on a new appliance.
An even better strategy is to set up an emergency savings fund. Set up a savings account and make monthly deposits into it. Only use it for completely unexpected expenses. Make sure you know what’s in the account. And if you ever need to withdraw money, replace it as soon as possible.
This brings us to a good point. This way you can recover quickly after the purchase. Go through your budget (you do have one, right?) and see if you can cut back on some things temporarily. Stop ordering pizza every Friday night and make your own at home. Forgo a night out on the town and watch a few movies on Netflix instead of going to the movies.
Use the money you don’t spend in the next few months to replenish your emergency fund. For an extra boost, work some overtime, do some freelance projects, or temporarily take on a part-time job to get back on your feet quickly.
But what do you do if an expense comes up before you’ve had a chance to replenish the emergency fund? Take a deep breath and evaluate the situation. Can you do without the item for a while? Just long enough to scrape together the money to repair or replace it. If it’s the dishwasher, that’s easy. You can wash the dishes by hand for a while. If it’s the refrigerator or the car you rely on to get to work every day, that’s another matter.
If you need the broken item, you should weigh whether repairing it is cheaper than replacing it. Even if it’s not the perfect solution, you can drive it to work until you can afford another car. Shift your money around, and if there’s no other option, charge it to your credit card and get to work. Your only goal now is to pay off this expense. If you put every penny of your disposable income to work, it won’t take long to accomplish.
Once your bills and credit cards are paid off, do everything you can to build up that emergency fund. After all, you know that something else will break at some point.
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