Just when you think you’re on track with a perfect budget for 2012, it happens.
Your water heater breaks, you end up in a fender bender or your niece decides to get married in the Caribbean.
No matter how much you plan, unexpected expenses always pop up.
But, they don’t have to throw your budget entirely out the window.
Here are five often overlooked expenses that can severely damage your financial plan, and ways to be sure they don’t:
1. Health Expenses
50 million Americans lack health insurance coverage, and even those with good insurance can be financially devastated by an expensive surgery, accident or sudden illness.
A minor fender bender can send someone to the emergency room, where the average bill is $1,000 for someone who is uninsured.
With insurance, depending on your plan, you might still be required to pay the full cost out of pocket before the insurance company pays any part of the bill.
It’s no wonder that health expenses are the leading cause of bankruptcy filings.
[InvestingAnswers Feature: Learn the Top Causes of Bankruptcy and How to Avoid Them.]
How to Prepare
Health insurance may seem like something you can skip to save money, but an emergency could cost you thousands. If your employer doesn’t offer a health insurance plan, consider purchasing your own coverage.
If you can find a few things to cut from your monthly bills, like premium cable or mobile phone plans, spending extra on health insurance is a wise financial move. For other ideas on how to scale down expenses, try “Extreme Ways to Save More Than $10,000 in 2012.”
2. Major Home Repairs
Experts suggest setting aside 1% to 3% of your home’s value for regular repairs.
But what if you need a new roof, air conditioner or furnace? The cost of a new furnace averages around $3,000 — and replacing an an oil-burning furnace can cost twice as much. Depending on the material and size, a new roof can cost anywhere from $700 to $60,000.
How to Prepare
When it comes to home maintenance, regular checkups can help you catch problems before they become emergencies. Check for proper drainage around your house to prevent foundation problems and keep your trees trimmed to keep limbs from falling or scraping against the roof. Service your heating and cooling system annually to make sure it is in top running shape, and clean those air filters.
This home maintenance checklist can come in handy.
3. Weddings and Gifts
Who knew being a friend would cost so much? An often overlooked expense for people in their 20s and 30s is the cost of weddings, parties and milestone gifts.
Bachelor/bachelorette parties, wedding attire, graduations, baby showers and other gifts can really add up quickly. A domestic flight, two nights in a hotel with meals and a $50 wedding gift averages close to $800.
How to Prepare
If a close friend seems close to tying the knot, find out if they have any ideas about how or where they’ll do it. Do they dream of a destination wedding in Hawaii or are they planning to get married locally, where costs would be dramatically lower?
What about the bachelor/bachelorette party? Do they want to celebrate in Las Vegas, or are they fine with a night at their favourite watering hole?
Hopefully, you’ll at least have a few months to budget. It might mean holding off on a vacation you had planned or cutting back on your entertainment for a few months to prepare. If you can’t afford the destination wedding, maybe you can afford a special gift instead.
When it comes to graduations and baby showers, you could always offer to host a small party at your home, and ask friends to contribute food and beverages.
4. New Family Members
Children: sometimes with all the planning and execution, they come on their own schedule. Those little bundles of joy can be quite costly.
The average cost of a birth is around $10,000, and that is without any complications. Cesarean sections and some common complications can make costs balloon to close to $22,000. You can’t forget all of the prenatal care.
Expecting mothers visit their ob-gyn an average of 14 times during their pregnancy. Add laboratory blood work and ultrasounds to the copay, and these visits will typically cost around $133 each.
How to Prepare
Open and honest communication with your partner is vital here. If you’re planning to have a child or are even considering it, check your insurance to see what is covered and if you need to increase coverage.
Fortunately, you will have a little time to prepare, but an unplanned pregnancy might mean some dramatic budget adjustments. Remember, if both parents work, at least one of you will need to take some time off from work, which requires savings.
Be realistic. A child can cost between $5,490 and $11,320 in the first year.
[InvestingAnswers feature: 5 Reasons One Parent Should Stay At Home.]
5. A Dead Computer
If we haven’t done it ourselves, we all know someone who has spilled water all over their keyboard or dropped their laptop trying to drink their cappuccino while talking on their cell phone.
We rely on our computers for work, school and entertainment. If something catastrophic happens — like a hard drive failure, screen damage or even theft — we can barely get through another day without needing a new one.
A new computer will set you back $800 to $2,000, and that’s before you’ve bought the accessories and software.
How to Prepare
If you need your personal computer or laptop for work, you should be prepared to replace it every three years. That means budgeting to save around $50 to $60 a month. If after a year, your computer dies, you will already have between $600 and $720 saved, meaning it won’t be such a budget buster to pay for the new computer.
Some companies offer insurance plans for computers that cover certain damages and/or theft. You could always opt for a used or refurbished model as a backup.
Finally, remember to back up those so you won’t need a costly data recovery. External hard drives are inexpensive and can automatically sync with your computer. You can also save files to the cloud, such as through Google Docs or Amazon Simple Storage Service, where they can be accessed from anywhere.
The Investing Answer: Even the strictest of savers can be in for a surprise when something breaks or a close friend decides to get married in Thailand. Regular checkups, whether for your home or your health, can also help you prevent certain emergencies.
You can’t avoid every financial surprise, but stashing away a little bit of your paycheck every month can ensure some surprises don’t deplete all of your savings, or worse, leave you bankrupt.