You were living within your means. You were able to pay your bills every month, buy groceries and gas and keep up with the minimum payments due on your credit cards. However, you didn’t have much left over at the end of the month, so you never got around to opening a savings account or starting an emergency fund.
That’s a problem. Having some extra money set aside isn’t important just for unexpected medical bills, a job loss or cut in hours, the transmission in your car finally giving out or your furnace breaking in the middle of winter.
There are a lot of unexpected expenses (many of which shouldn’t be so unexpected) that can throw a wrench in your budget and potentially lead you into serious debt. These include:
Annual and other periodic payments: These shouldn’t be a surprise because you have them every year. They include property taxes, some insurance premiums and car registration fees. However, people often forget to include them in their monthly budgeting. If it’s an annual fee, divide it by 12 and include that amount in your monthly expenses.
Utility rate and other fee increases: New York weather can be highly unpredictable (from bitter cold winters to unbearably hot summers), and so can our utility bills. There are other fees, like homeowners’ association dues, that you can count on to go up every year. If you live in a non-rent-controlled apartment or home, it’s a given that you will see your rent go up at some point.
Wardrobe updates: You and your spouse might be able to get along without having to buy too many new clothes every year. However, if you have growing kids, you’ll need to spring for new clothes and shoes regularly. Don’t forget to budget for these.
Gifts: Don’t forget to set aside funds for birthday, holiday and other gifts. You may consider buying things throughout the year to put away for Christmas or Hanukkah gifts so that you’re not hit with overwhelming credit card bills in January.
For many families, it only takes one emergency or other unexpected expense to throw the finances in disarray and leave them with overwhelming debt. If you need help getting back on track, it may be wise to discuss your debt relief options with an experienced attorney.