Everyone has unexpected expenses that completely disrupt a budget. I think I have these every month, February it was my car tabs which sank me to the tune of $185.00. Granted, this is not exactly an unexpected expense, more of a crap, is it time to pay that again already expense. I even asked the clerk if they were always that much and she said that maybe next year they’d go down. I’m not counting on it. Sure seems like a lot of money for a couple of stickers but the alternative I’m sure would cost more.
Usually unexpected expenses consist of emergency room charges, car repairs, or your sister’s wedding. Luckily, my sister’s already married so I’m not worried about that one.
This just enforces the fact that we actually need two savings accounts. One for unexpected expenses and the other for actually saving. How in the heck does one manage such a thing? It’s difficult enough (for me, anyway) to get something into one savings account, and now surprise…I realize I need two.
So I guess my main question is, how much needs to go into the unexpected expenses account? How much is enough to save per year to cover these phantom costs enough that it doesn’t hurt so much. Financially, February was not good to me. Great in all other respects (it’s even finally getting warm here) but money-wise I pretty much crashed and burned. I don’t want to save just enough in this fund to pay my car tabs, that would only be around $15.41 a month which is definitely do-able. But, how much needs to go into it to feel comfortable and not worry that a bill or expense is going to jump out and attack me? Or does everyone just use their regular savings accounts for those expenses? I know that a lot of people keep an account for taxes and insurance payments, but I don’t have that kind of stuff right now that I need to save for. Right now, I’m looking for an amount to save each month for emergencies.
I have read that an emergency fund should have 3-6 months worth of wages. This is a smart idea, but the concept is based on the possibility of losing a job and being able to still survive. I think if I had this kind of savings or an emergency fund, I would’ve charged a lot less on credit cards that I’m paying off now. So for savings my goal is $50 a month for just saving and I’ll start with $20 a month for emergency in the same account. Not the greatest plan, but for now it’s better than nothing.
I’ll keep you posted on anything I find out. Otherwise, things are moving along smoothly. I need to get groceries this weekend which has already started causing anxiety attacks. Or maybe that’s because we only have ramen and kidney beans in the cupboard. Not sure.
Have a great weekend and as always, thanks for reading!
8 Comments
I don’t know if this helps you feel better, but I am right where you are right now. I have the same questions and struggles.
I have no idea where you keep your savings, but you should consider opening an account with ING Direct. They have subaccounts that you can designate for smaller savings goals. http://www.iwillteachyoutoberich.com/blog/tip-using-sub-savings-accounts-for-unexpected-expenses/
@J.Lynne No, it doesn’t make me feel better knowing others are struggling. I do believe we can figure this out together though
I’m going to check into Mneiae’s suggestion with ING then I just need to find the money to put into it lol. I’ll keep you posted.
It gets better. I believe this.
@Mneiae Wow..that’s great information. I will definitely look into that! Thanks!
I think that as you develop a budget, you should break down what the annual costs of these semi-surprise expenses and then work that monthly cost into your budget. I set aside 1/6 of a car insurance policy aside in an ING Direct subaccount each month so that when my next policy renewal comes up, I’ve already got the money. When I have irregular income, I just adjust the lump sum to accommodate. ie: if I get paid for three months all at once, I subtract 3 months’ worth for the insurance and pop it in the account.
I once had the same struggle. The solution that I decided on is below…
Before I started to agressively pay off debt I built a small emergency fund of $1000, which is in an ING account. When an emergency comes up, I pay for it. Of course, I have to refill it. To refill it, I take a break from my debt payment and redirect the money to the emergency fun.
When I am out of debt, I will build my emergency fund to be 3-6 month of living expenses.
I hope this helps.
(Comes from Dave Ramsey ‘s 7 Baby Steps http://www.daveramsey.com/new/baby-steps/)
I’m working on the $1000 e-fund, plus I’m putting aside $50 a month for ongoing car stuff- or I will be, as soon as I find an extra $50. I think $600 a year should be more than enough to keep even a 14 y/o ford going.
With what they’re paying lately, I only use ING for money transfer between banks at this point, and keep my savings in a bank in another state. Access is faster, and I don’t really lose anything on the interest.
@Everyone. How is it that the whole world knows about having accounts at ING except me? Thank you everyone, I will be looking into it! @lazyjayn lol…I’m looking for that same $50.
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