There is a long list of unexpected expenses you need to plan for. Ranging from additional power and heat usage, urgent home repairs, and winter clean-ups to car repairs, insurance premiums, special occasions, and medical expenses, the associated costs seem endless.
Not planning for them efficiently knocks off your finances all of a sudden and turns your financial goals upside down. Consider expenses like property taxes, insurance premiums, Diwali gifts, car repairs, medical bills, etc., and identify ones going above your regular costs.
Set aside some amount in a separate account and access it only when needed. Revise your budget at regular intervals and look for ways to reduce unnecessary expenses.
Making savings automatic is a great way to organize a routine. It will regularize savings and keep your money safe. When emergency expenses arrive, determine your priorities to make. The trick is to save maximum, avoid debt, and plan the financial future efficiently.
Also, Read: What is a Debt Trap? How Can We Avoid It?
Types of Unexpected Expenses
Several different types of unexpected expenses can catch you off guard. Some unexpected expense examples include the following:
- Household Expenses: Including electrical and plumbing emergencies, appliance replacement or repairs, etc.
- Auto Repairs: Including sudden breakdowns, car accidents, part repairs or replacements, etc.
- Medical Expenses: Including illnesses, nursery care, accidents, injuries, hospitalisation, etc.
- Family Expenses: Including funerals, divorce, job loss, unemployment, school and college fees, pet emergencies, tax payments, theft, etc.
- Natural Disasters: Including floods, fires, tornadoes, hurricanes, snow, ice storms, blizzards, etc.
Any emergency takes a toll on your finances. Therefore, planning for them keeps you in a safe zone and lets you manage them without feeling the pressure.
How to Plan for Unexpected Expenses?
Planning for unforeseen expenses seems complicated due to their unpredictable nature. However, get started with the following steps to streamline your saving habits and stay prepared for the unexpected:
Topic | Key Points |
Emergency Fund | - Create an emergency fund to handle unexpected expenses. - Save a portion of your monthly income. - Aim for an emergency fund equal to 2-3 months of income. - Helps in case of job loss. |
Budgeting for Unexpected Expenses | - Unexpected expenses can disrupt your budget. - Track income and expenses. - Identify money-saving opportunities. - Adjust budget based on financial obligations and goals. - Address habits affecting finances. |
Emergency Fund
Set up an emergency fund to plan for unexpected expenses as they arrive. In case of a job loss, you can sustain your regular expenses conveniently until you find another job or income source.
Analyse your income, expenses, and spending habits to budget your finances. Avoid overspending and stay within your budget when purchasing things. Aim at saving 30-40% of your monthly income to build a sufficient emergency fund.
Budgeting for Unexpected Expenses
Unexpected expenses can cause significant stress and imbalance your budget. Whether it is a family emergency, medical bill, or car repair, you can never predict an urgent cash requirement.
To plan ahead and cope better, the first step is to track your income and expenses, which helps identify where money-saving is possible, how much you can set aside for emergencies, and how much you must save to cover financial obligations.
Once you get a clear picture of your income and expenses, adjust your budget accordingly and allocate funds according to your wants, needs, and goals.
Also, Read:
How to Pay Unexpected Expenses?
When an emergency hits, paying for the extra expense poses a real challenge. Whether it is a medical bill, car repair, or appliance replacement, you must find ways to cover the cost.
Method | Description |
Emergency Fund | Use savings equal to 2-3 months of income for unforeseen expenses. |
Available Cash | Use any available cash, such as savings or gifts, to cover unexpected costs. |
Credit Card | Pay for unforeseen expenses with a credit card but be cautious of high interest rates if not paid off promptly. |
Personal Loan | Borrow a flexible personal loan, like up to Rs 5 lakh, to cover emergency expenses. |
Line of Credit | Access funds with a set credit limit and pay interest only on the amount withdrawn. |
Crowdfunding | Raise capital from multiple investors on crowdfunding platforms for unexpected expenses. |
Short-Term Loans | Borrow short-term loans for temporary financial needs and repay when your salary arrives. |
Use Your Emergency Fund
If you have built an emergency fund, access it to cover an unforeseen expense. As mentioned, it should equal your income worth 2-3 months. Evaluate the costs involved and withdraw only what is necessary.
Use Available Cash
Rather than digging into your emergency fund, use cash if you have some available. If you recently received a gift or saved some amount from your earnings besides the emergency fund, use it to pay for the unforeseen expenses.
Credit Card
A credit card is an easy financial resource to cover unexpected costs and repay them in instalments through monthly credit card bills. However, remember, if you do not clear your credit card bill by the next month, the interest rates are hefty and increase your expenses significantly.
Personal Loan
You can borrow a Personal Loan of up to Rs 5 lakh from Hero FinCorp for any emergency expense that arrives all of a sudden. The repayment terms are flexible, allowing you to repay the EMIs without stressing your monthly budget.
Line of Credit
Line of credit is a special facility that keeps funds in easy access whenever you need them. A finance company gives you a credit limit up to which you can withdraw anytime. You must pay interest only on the amount you withdraw from your credit limit.
Crowdfunding
Crowdfunding is a financial resource to raise capital from multiple investors. Some need repayment, while others are for donation purposes. Use a crowdfunding platform to raise funds when you need money to cover unexpected expenses.
Short-Term Loans
You may borrow short-term loans for short periods to meet unexpected costs. For instance, cover an urgent home repair with a short-term loan and repay it in a few months as your salary arrives.
Also, Read: How does Emergency Loan Work
How Does Personal Loan Help You in Unexpected Expenses?
Personal Loans are easily accessible funding options you can obtain in minutes from the comfort of your home. Here are a few Personal Loan features that can help you cover unexpected expenses without stressing your budget:
- Ample loan amounts
- Easy eligibility criteria
- Minimal documentation requirements
- 100% digital loan application procedures
- Competitive interest rates
- Flexible repayment terms
- No branch visits or paperwork involved
- No usage restrictions
- No collateral requirement
How to Apply for a Personal Loan Online?
Planning to apply for a Personal Loan? Follow these steps to get one from Hero FinCorp:
- Visit the Hero FinCorp website or download the loan app.
- Log in or create an account.
- Reach the Personal Loan section.
- Fill out an online loan application form.
- Upload scanned copies of the necessary documents.
- Give some time for the verification and approval process.
- Accept the loan offer to receive disbursal directly into your bank account.
Conclusion
Building a budget that helps achieve your financial goals while keeping some funds aside for emergencies is crucial. You must also manage your cash flow for everyday expenses and build funds to achieve your goals, like a bike or home purchase. When an emergency strikes, a Personal Loan from Hero FinCorp is an excellent tool to tackle unexpected expenses and schedule convenient repayment. You can get an instant Personal Loan of up to Rs 5 lakh at interest rates starting at 11% with a flexible repayment tenure of up to 60 months. Use a Personal Loan EMI Calculator to choose a suitable EMI and tenure as per your financial situation.
Frequently Asked Questions
1. What is an example of an unexpected cost?
A medical emergency is the best example of an unexpected cost. Whether it is an illness or an accident, it always comes suddenly and takes a toll on your finances.
2. What are the most common unplanned expenses?
Common unexpected expenses include medical costs, car breakdowns, home repairs, last-minute wedding expenses, urgent travel plans, etc.
3. Is it better to use a personal loan or a credit card for unexpected expenses?
The choice between a personal loan and a credit card depends on your specific situation. Personal loans typically offer lower interest rates and fixed monthly payments, making them a better choice for larger expenses
4. Can unexpected expenses affect my credit score?
Unexpected expenses can affect your credit score if you handle them with credit and fail to repay them on time.
5. How do I prioritise unexpected expenses when I have limited funds?
Prioritise unexpected expenses by listing your expenses. Keep the most crucial and mandatory expenses on top and so on.
