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Unexpected Expenses

I previously wrote about the necessity of flexibility when budgeting regularly. There is no way to predict everything that is going to happen within a given month, so when things change, you have to be able to shift your income and/or expenses to be able to accommodate those changes. My clients often contact me to determine how to handle unexpected expenses, so I thought it would be useful to write about it.

Picture this scenario--

You keep your socks in drawer. That drawer is already stuffed to the brim, but one day when you are walking around in Target, you are overcome by the desire to buy this irresistible pair of fuzzy socks. When you get home with said socks, you have two choices: 1) You can rid yourself of another pair of socks to make room in the drawer for new ones or 2) You can find a bigger drawer.

That's really how this "balancing your budget" thing works.

Take an unexpected $150 car repair:

1. Can I reduce non-fixed expenses?

Examples: reducing restaurant, entertainment, or clothing budgets.

2. Can I make more money?

Examples: working extra hours (if you have that option), finding ways to make money on the side, selling items you don't need, and so on.

3. Can I forego this expense altogether?

Can the car repair wait until a new budget month? Can I fix it myself, or have a friend help me?

I hesitate to list any additional steps, as I know it is easy to skip to those other options immediately. Only in true emergency situations when steps 1-3 have been fully explored should any additional steps be considered, such as reducing how much you are saving/investing, pulling from your emergency fund, borrowing money from others, or putting it on a credit card. Really, if you operate as if there are no other options, 99% of the time, steps 1-3 will work. Drew and I have come up with some very creative ways to make money in a pinch. I have cooked dinner/done laundry/cleaned houses for others, babysat, tutored, done yard work, helped organize closets, taken entry level side jobs, performed financial services, and much more.

"Money doesn't grow on trees" as they say. You can't just keep spending without either 1) cutting other expenses (removing the proverbial socks from the drawer) or 2) adding income (finding a bigger drawer).

PS: why did it take me so long to think of the sock analogy?! And why does it not seem just right. Please feel free to comment or message with better analogies so that I can update it with a better one!

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