Hi everyone,
I am new to budgeting and have been using GoodBudget for a few months. I am doing well with my regular expenses, but I am struggling with unexpected costs that pop up from time to time. For example, last week my car needed urgent repairs,. and it threw my budget off track.
How do you manage these surprise expenses without derailing your financial plan: ?? Do you have tips or strategies for setting aside funds for emergencies or adjusting your budget when these things come up: ?? I also read this: https://www.herofincorp.com/blog/unexpected-expenses-cpq but couldn’t get much more information. so now I am looking for more insights from this community!
I’d really appreciate any advice or personal experiences you can share.
Thanks! 
Maria
Hi Maria and welcome! Unfortunately these things happen to all of us, so it’s important to have a contingency plan. In an ideal world you’ll create an “Emergency/Unexpected” envelope and add a little to it as often as you can, letting the balance grow until you need it. Having it in addition to a savings envelope means you won’t need to pull from your true savings when these things come up (because they always will!), but that’s a luxury not everyone can afford.
Things like car repairs and maintenance often come up unexpectedly but they are predictable, so setting a little aside each month not only makes sense but it’s pretty important. You should have an envelope for regular car maintenance too, that includes oil changes, inspections, new tyres, etc. Setting aside just a tiny bit each month means those expenses can be covered when the time comes.
For those unforeseen expenses, I use an Annual envelope (not a Goal) and allocate a bit of my monthly earnings to it. If it ever gets so big I think I definitely couldn’t need it all, I move some to Savings.
When those true surprises come along, use the money in your Unexpected envelope first before you pull from your regular envelopes, credit, or savings, and hopefully that will help you stay on track.
Hope this helps!
2 Likes
If you haven’t read or listened to Dave Ramsey, you should look up his “baby steps”.
Step 1 is to create a $1000 emergency fund. Find or make $1000 and put it in an envelope and do not touch it except for emergencies like your car breaks down. If that means you pay only the minimum due on credit cards for a bit, then do that. If you have to sell things to get some extra cash then do that. If you have to do some side jobs delivering pizzas then do that. The goal is to set aside $1000 as quickly as possible.
Step 2 is where you create your budget and start doing the debt snowball to pay off all debt except your house. If you have an emergency and have to spend from your emergency fund, then you actually pause Step 2 and go back to Step 1. Cut back your budget, stop paying extra on credit cards, sell something, whatever to get back to Step 2 as quickly as possible.
It’s a bit of a scorched earth plan. Dave calls it “gazelle intensity”, as in you are a gazelle being chased by a lion (debt) so you better run like your life depends on it.
Ultimately the point is to increase your income and cut out as much fat from your budget as possible. Dave calls it living on “beans and rice”. Stop eating at restaurants, stop magazine subscriptions, turn off cable TV, quit all luxury expenses, etc. By cutting your expenses as much as possible to get out of debt as fast as possible, what you are doing is freeing up as much of your income as possible to eventually go into savings, and if you can increase your income at the same time then it all happens faster.