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Plan For Unexpected Expenses and Get Out of Debt

My wife and I have been working on our budget for almost a year now and we still do not have it perfected. Our goal is to get out of debt within the next six months or so and we plan our budget accordingly, but I don’t think we have successfully matched up our expenses to our budget yet. Let me tell you, it’s frustrating! The car needs a new part, subtract $2,000 from the bank account; ouch! That was not in our budget.

First of all, a budget is not fun, not even for me and I’m the nerd in the relationship. It takes time, countless meetings to stay on the same page, plus there’s the relentless updating to the budget if unforeseen expenses occur. Secondly, becoming debt free is a slow process, which makes budgeting even more of a bore. There is a silver lining to this dreary time though, and that’s getting out of debt of course! Do not forget about the goal that you’ve set for yourself. Continue to move forward with your debt free plans and think of the freedom you will feel once you get there.

Based on my experience with budget planning, the one thing that trips people up the most is that unforeseen expense. They’ve get everything mapped out: this much for food, this much for gas, this much for clothes… but then the heater goes out in the house. Well that wasn’t in the budget! So, out comes that failsafe for your emergencies, the credit card. You promise yourself that you’ll pay it off as soon as you can, and then continue to strive toward that debt free goal. Like it or not, at this point, you will feel defeated. Maybe it will cause you to give up on this fantasy world of no debt, but I hope not. Let’s get prepared for these unexpected costs.

1) Build up your emergency fund to at least $1,000 (and cut up the credit card)

2) Create a budget “bucket” for car expenses, house expenses, and anything else that may cause you money loss.

It really is that simple! Do not only budget $10 a month for that quarterly oil change, but rather, budget $100 a month for the unforeseen tire blow that may happen. The same logic goes for your house. Make sure you increase your budget so that you’ll have enough money to repair the roof in a few years, and stock some bucks away for that heater unit. It’s really not rocket science, but I admit that it is tough to put all that money away when it seemingly goes toward nothing.

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My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

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