It always seems that large expenses come in bunches. For us, that time is at the end of the month when our mortgage and a variety of utility and satellite TV bills come due. When those large expenses are coming up every month, that always seems to be the time that unexpected expenses seem to pop up. When our cash flow is lowest.
While I know that unexpected expenses are going to happen, for some reason when they show up it's still such a surprise.
Unexpected Expenses Come In Bunches
This past week I had a couple of unexpected expenses pop up, right at the most inconvenient time, but luckily, it hasn't been a huge issue because we planned ahead.
The Huge Doctor Bill
This past month my wife had a doctor's visit. It was a follow up to check up on her health following a massive blood clot that she had in her leg a couple of years ago. They wanted to make sure that everything was still going fine with her medications, her leg was doing fine and to make sure that there were no reasons to be concerned about any new clotting. The did some blood tests, as well as doing an ultrasound to make sure that there were no indications of any new clotting.
The test results have now come back, and thankfully my wife's health is fine. Her medications have regulated her blood pretty well, the ultrasound came back free and clear and there's no real danger of any new clotting happening anytime soon. That's the good news.
The bad news arrived in the mail this past week. We now owe just under a thousand dollars for a day of doctors visits. Insurance took care of part of the bill, but after co-insurance and a reduction in the allowed amount, we still owe just over $850.
I tried to think back to just what may have caused the bill to be so huge, and there it was on the statement. About half of the bill was from the specialists we saw at the hospital, and the other half was from the ultrasound. Ouch!
Going To The Dentist
While the $850 bill hurt, it wasn't the only unexpected expenses this month. I also had a visit to the dentist a couple of weeks ago. While a normal visit to the dentist for a cleaning and flouride treatment wouldn't cost that much after insurance, this visit was a bit different. It turns out that they discovered a cavity or two on my teeth, and a couple of old fillings that needed to be fixed.
Yesterday I returned to the dentist to get those things remedied. After an hour in the dentist chair my teeth are fixed. While my teeth are fixed, I'll also be getting a nice big bill in the mail to show for it. I'm thinking it's going to be around $2-300 based on previous visits like this one.
How We've Planned For Unplanned Expenses
Thankfully despite the fact that we've paid thousands of dollars in taxes this past month, as well as paying a couple of thousand dollars in normal bills, we've still been able to pay our unexpected expenses without any problems. Why? Because we planned ahead and saved up for just such circumstances as these.
First, we elected to deduct $1500 from my paycheck to put in our flexible spending account this year, in order to help pay for medical expenses. We tend to be higher users of health care, and even $1500 is going to be low this year. After submitting this $850 expense to be reimbursed, we'll be about maxed out for the year already.
We also have saved up a 12 month emergency fund in our Ally Savings account, which means that if we ever have big expenditures like this, paying for them shouldn't be a big deal. We did have to pull some money out of that account this past month to help pay for our big tax bill, but it should be replenished within a month or two.
How To Protect Yourself From Unplanned Expenses
What are some steps that you can take to protect yourself from large unplanned expenses, like the ones we had this past month?
- Buy insurance to cover catastrophic circumstances: Make sure to buy insurance to cover you for the most catastrophic circumstances that in all likelihood would bankrupt you. In other words buy good health insurance, auto insurance, life insurance and other types if they fit your situation. Having health insurance in the past 5 years has saved us from having to pay over $250,000 in medical bills!
- Save up an emergency fund to cover all other contingencies: If you're still in debt, save up a small emergency fund of $1-2000 in order to cover you for most unplanned expenses. After the debt is gone, bump that emergency fund amount up to 6-12 months of expenses, enough to cover almost any circumstance.
- Use other methods to cover unplanned expenses, while saving: Take advantage of other methods to cover unplanned expenses, like a flexible spending account. With a FSA you can get reimbursed for expenses up to your elected amount, even if it's early in the year and you haven't contributed enough yet. (We did this for this latest $850 expense) Not only that but you'll save on taxes! Or use a Health Savings Account (HSA) to save up funds for when they're needed, while saving and watching the money grow.
- Use the money when you need to, then replenish it: When you come to a situation where you need to use emergency cash, don't feel bad about using it, that's what it's there for. But after you pay for your unplanned expense, don't forget to save up and replenish the account.
The key to rolling with the punches and not having unplanned expenses be anything more than an inconvenience is to plan ahead. Buy insurance, save up an emergency fund and when the expenses come they'll be covered!
Have you had to deal with any unplanned expenses lately? What were they and how did you cover them? Would you have done anything different? Tell us your thoughts in the comments.