March 27, 2020, 8:52 am

What are the Easy Ways to Pay for Unplanned Expenses

by: The Financial Blogger    Category: Personal Finance
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Do you have a savings account? I guess you have one. But then what do you intend to use the funds for? Emergencies? What about emergency funds? Logic demands that the funds in the emergency fund be used to cover unforeseen expenses. Even though this is an indisputable fact, it is challenging to determine what amounts to unforeseen costs. Many people confuse unexpected costs for different things. For instance, should the emergency fund be used for cyclical yearly bills? In this blog, we are going to discuss the easy way to pay for unplanned expenses. But let us start by understanding the concept of unplanned expenses first.

The Meaning of Unplanned Expenses

Insurance costs, tax obligations, and other costs that are supposed to be paid yearly do not amount to unexpected. This is because one is ultimately required to pay for them either annually, quarterly, or semi-annually. So then how can you manage these costs? Well, you can save a certain proportion weekly or monthly specifically for this purpose. At no point should an individual use emergency funds to cover such expenses. What about intermittent maintenance or repairs? Here is another aspect where individuals make mistakes.

For instance, do you have a leaking roof? Are you supposed to pay a certain amount of money for health insurance? Sometimes individuals mistake these for unplanned expenses. In reality, such costs do not amount to unexpected costs. This is because one is expected to meet medical bills or service his car at one point in time. This implies that you need to include a certain portion of the budget to cover variable costs. 

And now the question is, what really amounts to unplanned expenses? Well, emergency funds are supposed to cover costs that cannot be classified as annual bills. It should not be utilized in such things as yearly bills. Unexpected costs involve such things as running out of a job or being plagued with considerable unforeseen health costs that insurance cannot account for. With this concept, you can now readjust your budget appropriately.

Easy Ways of Paying For Unplanned Expenses

Many people are plagued with unplanned expenses. Nevertheless, very few are always prepared to finance them. A recent survey indicated that about 40% of Singaporeans lack enough money to provide for most unplanned expenses. In case you are operating based on a set budget, you may not really struggle a lot. However, an individual surviving on paycheck to paycheck can find it so challenging to deal with even a little setback. We all find ourselves in cash shortage. Here are the easy ways to pay for unplanned expenses.

  • Cut your costs

Devote some hours for examining your regular expenses. While it might appear overwhelming, it pays to analyze credit card reports, payments made, and medical bills. This information can help you get an overview of what consumes most of your money. After tracking all your costs, the best thing to do is to cut variable expenses. This includes the money that you spend on such things as transportation as well as on utility bills. For instance, you have the option of switching off that thermostat over the winter or significantly lessening energy bills. Afterward, you can deal with discretionary costs. These include the products that you’d love to have, but you do not indeed need them. You can as well do away with daily coffee along with regular manicure. If you do all these, you will be left with some cash to cover unplanned expenses. While the funds may not be enough, it is the best way to get started.

  • Earn additional income

Do you operate with a very tight budget? Maybe it will be difficult to cut your costs. You have the option of looking for additional cash. Many individuals have benefitted from working overtime. Some have earned considerable cash working babysitting. Do you have some old clothes that can be sold? Another effective way of making extra cash is selling that item that you already have, but you do not use or need them at the moment. Still, you can look for a side hustle. The point is, looking for ways of getting additional income can help you finance unplanned expenses.

  • Apply for a loan

If the above strategies are not practical for you, then you take a personal loan. Estimate the amount that you need and send an application. If you have outstanding credit, you can quickly be approved by A1 Credit. The internet has revolutionized the lending sector, and with access to the internet, you can make an online application. You can receive funds within a short time. Nevertheless, you must be in a position to make monthly installments. It will also be good if you take some time to compare the rates charged by lenders on loans. Always go for lower interest since the loan will be cheaper.

Borrow from friends or members of your family   

In case of times does not allow you to take a personal loan, why not run to a family member or a friend? This is actually the cheapest alternative when it comes to dealing with unplanned expenses. These are the people closest to you, and they know you better. No doubt your condition impacts on them. They may not have issues allowing you a friendly repayment schedule. Additionally, most of them do not accept collateral or interest. Nonetheless, there might be critical repercussions of going down this route. Any misunderstanding regarding the repayment of the loan can significantly damage relationships.

Use your savings

In case your savings account is accessible without penalties, there is no problem using some cash from the account to cover unplanned expenses. However, use the funds only for unplanned expenses and nothing else. Cash savings can help you better in this case in comparison to investment savings.

The Bottom Line

There are different ways of paying for unplanned expenses. The only problem is that many do not understand what unplanned expenses constitute. In this blog, we have explained this concept in detail. We have also explained effective ways of dealing with them. How else do you think unexpected costs can be covered? Drop your comment below and let us see. Thank you!

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