Common types of unexpected expenses

Quick insights

• Considering examples of unexpected expenses can help you visualize what you need to set aside to prepare.
• Some unexpected expenses can be offset by specialized insurance coverage or with a dedicated savings account.
• Preparation for unexpected expenses will vary by person, depending on unique personal responsibilities and lifestyle.

When it comes to managing your personal finances, there are advantages to staying a few steps ahead. Though many costs and events are easy to see coming, others are unforeseeable and arrive at seemingly the worst moments. Depending on the situation and your preparedness, unexpected expenses can either be a simple inconvenience or a life-rocking emergency. In this article, we’ll detail unexpected expense examples and offer tips to help you prepare for financial emergencies.

Medical emergencies and health-related costs

Anyone can fall ill or have an accident at any time, and there’s a wide range for how serious the implications can be. Unexpected health-related costs could include:

• Emergency room visits and ambulance services
• Out-of-pocket expenses for testing and procedures not covered by insurance
• The onset of new illnesses that will require ongoing treatment
• Dental emergency expenses, such as needing to pay for a root canal or crown

Preparing for health-related costs

In addition to standard health insurance, many people choose to make regular payments into a Health Savings Account (HSA) or a Flexible Spending Account (FSA) to mitigate medical costs. Both HSAs and FSAs allow you to save for medical expenses, tax-free. Differences include:

• HSAs: These accounts are typically offered alongside a high-deductible health plan and function similarly to a savings account. Once opened, an HSA is owned by the individual and the balance can roll over from year to year.
• FSAs: These accounts are tied to employment and the funds contributed typically expire after a certain amount of time. Self-employed individuals aren’t eligible for FSAs and the contribution limits tend to be lower than HSAs.

Home repairs and maintenance surprises

When it comes to unexpected expenses for building repairs, this is an area where renters get a break. While many home repairs and updates can be planned for, others may seem to come out of nowhere, caused by weather, an accident or unseen wear-and-tear. Some unexpected expense examples include:

• The sudden need for roof repair or newly discovered foundation issues
• Problems with plumbing in the home, including burst pipes and sewer system backups
• Making repairs related to natural disasters, such as flood, fire or earthquake damage
• Circuit breaker failure or the discovery of outdated wiring in the home
• Unforeseen replacement or repair of appliances, such as a malfunctioning water heater, stove or washing machine

Tips for homeowners

Setting aside money specifically for home repairs can help you prepare for both anticipated and unexpected costs. Given the potential costs of surprise maintenance or repairs, saving 1% to 5% of the total cost of your home per year can help provide the cushion needed to address issues as they come up. Regular maintenance and other preventive measures around the house may also help you avoid costly emergency expenses down the road.

Car repairs and transportation issues

If you own your own car, maintenance and repairs are a regular part of life. While many parts of car maintenance are easy to keep track of (for example, knowing you need an oil change every 5,000 to 7,500 miles), others surface unexpectedly. These could include:

• Major car repairs, such as transmission or engine issues
• Regular maintenance that can become critical, like tire replacements and brake repairs
• Accident-related costs, such as insurance deductibles and potential increases to premiums
• The cost of alternative transportation while your car is in the shop

Preparing for auto-repair costs

Limiting auto-repair costs can begin while you’re still selecting your car; researching brands, makes and models can help you choose a car that runs more reliably and is cheaper to repair. Making regular maintenance part of your budget can also help you avoid more costly repairs down the road. Similar to saving for home repairs, building a dedicated auto repair fund can be invaluable when more intensive car-related expenses come up.

Job loss and employment disruptions

One of the most complicated and stressful financial situations a person can find themselves in is an abrupt job loss. Depending on your circumstances, being let go or having your hours significantly reduced may mean putting all your efforts toward finding a new job. In the meanwhile, various costs may still need to be paid:

• All regular household expenses: groceries, utilities and rent
• The cost of continuing insurance coverage (such as through COBRA)
• Costs related to job hunting, including travel, professional attire or upskilling courses

Creating an emergency fund for monthly costs

Considering that it may take time to secure a new position, three to six months’ worth of living expenses (rent, utilities, other bills and groceries) is good to have set aside in the event of job loss. This may seem like a lot, so it may be best to accumulate toward this goal in smaller amounts over a long period, even while your working situation seems stable.

Emergency expenses for family and personal events

There are many other kinds of personal events that can impact us financially, including events in the lives of people around us, such as:

• Family weddings, funerals and births
• Legal issues such as divorces, custody battles and lawsuits
• Pet emergencies and other necessary veterinary care
• Distressing situations for family members who rely on us

Be sure to keep your unique life circumstances and connections in mind when considering costs you may want to prepare for. Many miscellaneous costs such as these can be appropriately addressed with a general emergency fund or by acquiring specialized insurances (as is the case for pet care and lawsuits).

In conclusion

Not every kind of financial cost can be specifically anticipated, but you may be able to prepare in a more general sense when considering your various responsibilities. To start, create a general-purpose emergency fund that could help cover costs in many kinds of situations. For more specific circumstances, consider specialized savings accounts and insurances to help you manage unexpected expenses effectively when the going gets tough.