Tracking an unexpected expense

Sometimes we have to deal with the unpleasant task of having an unexpected expense come up that makes us stressed out. How do you deal with it and how do you cover it?

Ideally, you want to prepare for unexpected expenses by planning a budget line item that is called emergency funding or unexpected expenses. Budgeting experts say these items should be 3-6 times your monthly salary so for example, if you make 2500 dollars a month, you should have at least $7500.00 in emergency funding.

But an unexpected expense is not the same as emergency funding, emergency funding is supposed to be saved in case you become unemployed, and those funds needed to last you through your job search which can take 3-6 months.

So an unexpected expense should be a separate line item on your budget. Things that are unforeseen can be covered by these funds and ideally, the amount saved should be what you’d need to cover some of the biggest daily items you have, such as tires for the car, etc. an unexpected expense fund should ideally be no less than $2000.00 to be able to cover expenses you don’t anticipate.

If this line item is not available because there simply isn’t room in the budget to plan for an unexpected expense, then you really have to get creative to cover such expense. Most Americans will tap into credit card funds to do so. If that is the case, those funds should be repaid as soon as possible to ensure you are not stuck paying interest on it and after the loan is repaid, continue putting funds aside to start building an unexpected expense fund. For a lot of people this means sacrificing something. According to Tue latest data, 29% of the US working population does not have ANY extra funds left after paying bills.

This is a crisis in the making. Sometimes a sacrifice has to be time away from family with a second job or foregoing a vacation or just a weekend trip. Budgeting is not for the weak minded and saving money in todays economy is getting to be more and more difficult.