We can’t always predict what will happen in life, but we can be prepared by saving for the unexpected. According to the most recent Federal Reserve Survey of Consumer Finances (2019), Americans on average have less than $5,000 in their savings/emergency account. Many financial institutions or professionals suggest that we should have a minimum savings balance of at least three to six months’ worth of household income to cover normal and unexpected costs. Saving for the unexpected (The Good, The Forgotten, and the Ugly) can help keep you and your family financially stable for when “life happens”.
~ The Good ~
There are lot of good reasons to save money, such as celebrating a friend’s purchase of their first home or going out of town for the weekend. However, we often don’t think about budgeting funds for the good or fun things that come up in our life. As you contribute to your savings account set aside some funds each month for the people and things that bring you joy!
Examples:
- Money for the “Hobby Fund” (i.e. snowmobiling, traveling, golf, quilting, etc.)
- Spur of the moment celebration dinners or events
- Gifts for others (i.e. birthdays, weddings, graduations, etc.)
- Vacation
- Date night
~ The Forgotten ~
There are a lot of expenses that we only incur maybe once or twice a year. If you are like me, I often forget when my vehicle registration renewal is due. Saving for “The Forgotten” expenses will help you be more financially prepared when those expense arrive and keep you from dipping into your other savings categories.
Examples:
- Safety deposit or other yearly financial account fees
- Annual memberships and subscriptions (i.e. gym or newspaper)
- Vehicle registration renewals
- Insurance for vehicles, trailers, or campers
- Routine repair and maintenance (i.e. home, vehicles, equipment, etc.)
- Insurance deductibles (i.e. home, medical, or vehicle)
- Utilities (i.e. propane tank fill-up)
- Holidays and birthdays
- School registration, supplies and athletic fees
~ The Ugly ~
The loss of a job or a home can be catastrophic from a financial standpoint. Having funds set aside to at least be able to pay bills for an extended period during one of these events is important to your overall financial and health well-being.
Examples:
- Loss of income (i.e. a job or side business)
- On the job work injury
- Major medical emergency or death
- Vehicle wreck or significant repair
- Complete destruction of the home or other property (fire, floods, or tornadoes)
~ Plan It Out ~
Take time to sit down and review your financial expenses to determine what Saving for the Unexpected looks like for you and your family. Set yearly goals for savings and celebrate your successes when you reach those goals. Use a calendar to help remind you when some of those expenses might be coming. Utilize a Savings Tracking Sheet, individual envelopes, or an app to help you keep track of what you are saving for and how much is in each category. Don’t be afraid to ask for help or utilize an accountability partner to help you stay on track with your savings plan.
Saving for the unexpected takes time and commitment, but it’s worth it. Individuals and families who have adequate financial resources reduce the burden of stress and conflict in their lives. Now is a great time to starting saving for (The Good, The Forgotten, and the Ugly) expenses you are likely to incur. More information can be found on personal and family finances from Colorado State University Extension.
