This is the first in a special two-part series on unplanned expenses.

Is there someone in your orbit of family and friends whose calls you hesitate to take? Someone who in the past has asked you for a “loan”? Perhaps it was to help pay for a medical expense or a traffic ticket or a car repair, or any number of life’s little surprises. Loan is in quotation marks because we all know what it is – a gift. Anyone who doesn't know how to budget is unlikely to save up enough to pay you back.

In Say Goodbye to Debt we covered how to adjust your lifestyle to live on 75-80% of your monthly net income. Doing so frees up 20-25% for retirement savings and unplanned expenses. Let's look at the best way to plan for expenses that occur on something other than a monthly basis.

Do Some People have More Bad Luck?

Have you ever noticed that some people seem to glide through life unaffected by the slings and arrows that come our way, while others somehow manage to hit every bump in the road? Do some people have more bad luck than others? Is it because some people make more money than others?
Money helps, but affluent people can get in over their heads just as easily as those of lesser means. It really comes down to living beneath your means and taking the time to plan your future. Perhaps by the time you’ve reached the end of this two-part series you will agree that there are no unexpected expenses, only unprepared people. 

The Majority of Americans Cannot Cover an Unexpected Expense of $500

A recent survey revealed that the majority of Americans do not have enough to cover a $500 unexpected expense. Maybe you are one of them. Read on and you will see how unplanned expenses can be turned into planned expenses in just a few basic steps.

Step 1: Identify the Expenses

The first step in planning for expenses is to identify them. While everyone’s situation is different, there are enough similarities to address common issues. Listed below are some unplanned expenses that can be turned into planned expenses:

• Children’s college education
• Wedding expenses
• Home roof replacement
• Home heating and cooling system replacement
• Neighborhood association dues
• Vacation
• Christmas gifts
• Tire replacement

Step 2: Estimate the Expenses

After you have identified the expenses, the next step is to estimate the associated costs. Here are some sample figures:

• Children’s college education: 2 children x $80,000 each = $160,000
• Wedding expenses: $35,000
• Home roof replacement: $7,500
• Home heating and cooling system replacement: $7,500
• Neighborhood association dues: $400 per year
• Vacation: $5,000 per year
• Christmas gifts: $750 per year
• Tire Replacement: $500

The college estimate is based on in-state tuition at a public university, living on campus, and graduating in four years. The other figures are based on national averages. You will need to replace these values with your own.

End of Part I

We are going to end it here for today. Be sure to check out the conclusion: There are No Unplanned Expenses Part II.

Photo credit: Pixabay The Eggstack Blog will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.