Unexpected expenses can sneak up on the best of us and derail our finances. Fortunately, there are solutions to minimize the financial strain these emergencies can cause.
Here are some of the most common unexpected expenses you may encounter and financial tools you can use to navigate them.
We all know car and home repairs will eventually put a dent in our budgets. However, they often catch us off guard because we never know exactly when the issues will occur.
The best way to deal with something like a broken radiator or furnace is to set up a separate fund for these expenses. This way, the money will be there when you need it, so you won’t need to dip into your emergency fund to cover the cost.
Even if you have health insurance, unexpected medical expenses can cause financial strain. According to KFF (formerly the Kaiser Family Foundation), 41% of American adults have medical debt of some sort.
You can use your emergency fund to handle medical bills. However, if you received care at a not-for-profit hospital, you can apply for charity care to help cover your medical costs.
The ACA mandates these charity programs. While each program is different, they all help reduce or eliminate hospital bills regardless of whether you have a health insurance policy.
Losing your job isn’t an expense per se, but it does make covering your daily bills more difficult. Job loss is the primary reason why having an emergency fund that’s at least three to six months’ worth of your expenses is essential.
Creating your emergency fund before job loss occurs can buy you time and give you some breathing room while you look for a new position.
Losing a loved one means you may need to take some time off for bereavement. It’s not just time off, though. There are expenses involved in handling things like a funeral and the probate or estate process.
An emergency fund can help in this situation. Additionally, it’s a good idea to have life insurance in conjunction with a will and/or trust to help your loved ones minimize their own financial worries should the worst-case scenario ever happen.
No one can predict when a natural disaster will strike, but they are becoming more common. An emergency fund can be a big boon in helping you navigate unexpected expenses that come with tornados, wildfires, floods, or earthquakes.
Other good financial tools to look into include insurance and FEMA funding.
There are many tools you can use to navigate unexpected expenses, but an emergency fund is the most important one. It allows you to fill the gap in situations where other financial resources are inadequate or as you wait for insurance payouts.
If you need help building your emergency fund, Payactiv’s Goal-Based Saving1 tool can simplify the process. Be sure to check it out!
1Goal-based saving is a set-aside account, and you will not receive interest or other earnings on the funds within the goal-based account.
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