Hey there! Welcome back to our Budgeting Series! We took a break last week to have some link-party fun and what fun it was! There were lots of great links full of fun ideas and delicious recipes.
In case you missed the other parts, you can catch up here and here. So far we've talked about why budgeting matters and how to create a budget. Today we're talking about what happens when despite your best efforts, the budget goes awry because of something unexpected.
Having a budget is like having a spending plan. It's based off of realistic spending habits on things you want and things you need. And it's pretty easy to stick to once you've really got it in place.
But then something like this happens:
And despite your best efforts, you can't find the "new starter for the car" category. So what, now?
For this post, I'm sharing a few tips that we use for these unexpected un-fun expenses that pop up from time to time.
1. Be realistic about the condition of your things and future needs. That car is my first - a 2002 Toyota Camry le that was a gift to me from my parents back in 2006. And it looks like it's in great condition. And that's not entirely false. But it has over 180K miles on it. So, while we don't expect to pour lots and lots of money into it, we know that it's normal for parts to sometimes have to be replaced. This time it was the starter, 4 years ago, it was the battery.
And while we hope that it lasts and lasts, we expect that we'll need to replace the Camry in a couple of years. So, we're doing our research early so we'll have a plan when that day comes.
When you're thinking about your budget and savings, it's good to know these things so you can put money away ahead of time.
2. Know where the wiggle room is in your budget. For us, the easiest place to cut, is from our personal expenses category. We use that money to do things like go out to dinner with our friends or buy new clothes, or in my case caramel or vanilla lattes or frozen yogurt. But, because this category is saved especially for things we want, it's the first that we look to when something unexpected comes up.
It's important to have a contingency plan, if you will, to know where you can find extra money in your budget if you have to.
3. Have a rainy day fund. Remember when I talked about giving every dollar a name? Well, to the extent that you can, some of those dollars should be named, "Savings" or "Emergency Fund" or whatever name you come up with that means, "in case something happens and I need some extra funds". Sometimes, there isn't enough (or any) wiggle room in your budget. And when that happens, you'll need to have something else to fall back on. It's important to be preparing for that in advance so that when something happens, you will have something saved up. I've read about having anywhere from 3-6 months of expenses saved up in these sort of "emergency funds", but I realize that for some, that might not be feasible. Maybe you're paying off debt, or simply living pay check to pay check. But, it is important to be saving something and putting it away for future things, because one thing you can count on is that unexpected things happen.
4. Be willing to compromise next month, too, because sometimes unexpected expenses just mean the budget goes over this month. And frankly, I think that's okay. Some things are in your control and some things are not. So, when something crazy happens, you might have to cut back on your fun funds or maybe be a little more frugal in the grocery store, or not drive your car as much to find room to get back on track. Whatever you do, don't scrap the budget. Just adjust it to work for your current reality.
And, I'll say it yet again, I'm no financial expert, but I do like to learn about money. And we try to be good stewards of the money that has been entrusted to us. So, these are just some of the things we've learned and the things that have worked for us.
With that, I'm wrapping up this series. It's been real, and fun, and of course real fun, but that's what I've got.
I would love if you would share your experiences too, so that we can all learn together. How do you deal with unexpected expenses? Do you have extra tips to add?
Feel free to also share you own thoughts on budgeting and creating a budget in Part 1 and Part 2 of the series.