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Ways to Handle Unexpected Family Expenses
Most families understand the fact that raising a family is filled with costly expenses, many of which are unexpected and require a little financial flexibility. An unexpected expense could be anything: unplanned home repairs and spur-of-the-moment medical expenses are certainly two of the most frequent.
Without proper planning, unexpected family expenses can quickly drain a budget and leave very little money left over for anything else. So what’s the best way to handle these financial “surprises”? There are a number of ways to get around such problems and keep the household running smoothly:
What are you really responsible for?
When a financial emergency pops up, most people are so stressed with wondering how they will come up with the money that they don’t really consider the notion that they may not be responsible for the entire bill. It is important to take a step back, assess the situation and establish exactly what your rights and responsibilities are in such an instance. For example, if there is a water leak in a rented home, it is the landlord, not the tenant, who is responsible financially. Before footing the bill, whatever it is for, it is essential to check out the matter thoroughly. If the matter is health related, for example, will the health insurance cover any of the required treatment? Or if the washing machine breaks down is it still under warranty? Don’t rush into grabbing your check book and doling out money until you’ve assessed the situation and determined what you’re really responsible for.
Create a family budget
No one can predict the future, so budgeting for a specific emergency expense is impossible. But what’s not impossible is planning for everyday expenses such as the mortgage or rent, groceries, utility bills, and school fees. Bills that a family pays every month, or on a regular basis, are easy to predict and plan for. So, create a family budget and stick to it. Then, it will be easier to carve out some extra cash to set aside for any unexpected bill that might arise. The key is to make sure that the extra funds aren’t used to cover everyday expenses.
Buy only what you can afford
A common mistake that many families make when managing their money is buying things they just can’t afford. A good rule of thumb is to always pay with cash or a debit card, which draws directly from one’s bank account. In this way, credit cards are not used for day-to-day expenses and sinking further into debt is avoided overall.
Preparing for a fiscal emergency
Having that emergency fund set aside is a great idea, but how realistic is this when most families today are surviving paycheck to paycheck? Making room in one’s budget for unexpected expenses isn’t as hard as it may seem – the trick is to just start small. For example, every time a deposit is made into your checking account, use online banking to transfer a small portion of the income into a separate savings account that is not easily accessed. Click here to read more about different family banking options.
Another good tip is to put any extra money into the emergency fund – a tax return, a bonus at work or an extra paycheck are all ideas of extra money you can add to your emergency fund. Families can also fund their emergency account by putting off a large planned purchase, such as an expensive family vacation or a new car, or perhaps by bringing supplemental money into the family by doing things such as holding a garage sale and putting the proceeds into the spare account. Because the purpose of this account is to tide the family over in times of financial duress or a spell of unemployment, the overall goal should be to have three to six months worth of living expenses set aside to meet such unexpected financial emergencies.
By preparing your family and putting some of the above tips into place, unexpected family expenses will have much less of a negative impact on your family, both emotionally and financially. Decide today to prepare your family.