Unexpected costs, they appear to be everywhere. Just when you think you’ve paid every outstanding bill, you’re hit with HOA fees, car taxes or child related expenses. Having expenses pop up throughout the year is a fact of life. You will never avoid them, you just have to attempt to soften the blow when you can.
Whether you’re purchasing a new house, a new car or booking a hotel room, unexpected costs are a given. New cars carry with them the requisite tax, tag, title expenses while hotel rooms apply taxes that can often add hundreds of dollars to an already expensive bill. Houses are a whole other story.
Having the ability to pay the mortgage each month is a critical component of affordability but other factors need to be considered. Furnishing the house, taking care of the yard and having money available for future repairs or cosmetic updates also need to be part of your house budget. Owning a home can be financially beneficial in the long run but it’s also expensive if you dive in head first without a plan for success.
There are also unexpected costs for things you may not have even considered.
My wife and I decided it was time for my youngest daughter to move up from rec league to club soccer. I knew there would be additional fees to join the team (which there were) but I wasn’t quite prepared for the over $300 we’d have to plunk down for the cost of her gear. She’s been playing soccer for several years now so I figured we already had everything she’d need to get started.
I was wrong.
Friends had prepared me for the financial impact and although it wasn’t unexpected, it was still more than I had estimated. There will no doubt be additional costs in the months ahead. We will absolutely be sacrificing the purchase of something that we may want to buy in order for my daughter to play the sport she loves. Most parents make this trade without hesitation, it’s the cost of doing business when you have kids.
The new year is fast approaching and with that, increases in our monthly bill for everyday expenses will also follow. Everything from streaming services to our mortgage will increase. Knowing this will happen and mentally preparing for it helps alleviate some of the stress. Initially, it seems like no big deal for something to increase by a handful of dollars a month, but a handful of dollars here and there adds up over time.
One of the ways I’ve found to be helpful is to create a “cushion” in our budget. If you’ve set aside $500 to pay for something, adding 10-20% on top of what you assume the cost will be can be helpful. Rather than putting undue stress on yourself because something cost $600 instead of the $500 you thought it would, you’ve already planned ahead for this scenario. If it so happens to be $500 or less, you’re already coming out ahead.
I use this same strategy when balancing my budget. If something costs $81 at the store, I’ll round to the next largest number ($90). This way, I’ll always have more in my account than I think. If an unexpected expense happens (and it will), I’ll have the additional cushion in my account to cover it. This would probably drive my accountant friends crazy as they’d want to balance their budget down to the penny. In my non-accountant brain, this strategy has served me well over the years regardless of the changes to my income.
If only there had been a price increase on sugar cookies this holiday season. That’s an unexpected expense I would’ve welcomed with open arms.
