Despite the fact that you save, invest diligently, and balance your budget every month, there will always be unexpected emergencies that come up. This is why you want 3-6 months of expenses saved for your emergency account.
While you may not be able to predict every unexpected expenses, you can prepare by understanding your top money drainers. These are items or large purchase goods that you will most likely require money in the future.
Own a car? Then you know you will have to pay gas and insurance every month. You probably don’t have to pay for maintenance expenses right now, but it is smart to assume that as the car gets older, the greater the chances you will have to.
The Biggest and Baddest… The Home
Your home is your castle. On average, people spend a third to half of their income for rent or mortgage. While your home is an important asset, it also requires some tender loving care (TLC)!
There are endless number of expenses that your home requires: the plumbing, electricity, windows, carpets, the flooring, etc. How old are the cabinets? If they are relatively new, then you probably won’t have to replace them. If they are 1970s brown particle board, whether or not you want to replace them, you probably will have to!
Most problems are due to age or trying to fix a major problem with a bandaid. It is important to understand that saving money now can lead to significantly bigger expenses in the future. If you are able to afford it, then often it is better for the long-run to fork over the money now.
One of the largest home expenses will be the roof. Depending on the type of climate and area you live in, problems with the roof are one of the most common issues. This is a house expense that if not taken care of immediately, it will grow only worse and can impact the entire house! If you see some potential problems, contact professionals or roof repair company to get an expert opinion.
Your Car – An expensive depreciating asset.
Especially if where you live and where you work are far apart, having a car is critical. Many see a car just as a means to get from point A to point B, and others see it as a form of self-expression.
Regardless of how you see it, unless you have the top-notch warranty and it is a new car, chances are your car will need repairs down the road. For people who drive erratically and don’t take care of their car, the expenses can be higher.
For older vehicles, the cost of fixing it is more than what the car is worth! Unlike a house which generally appreciates in value over time, a car (unless a rare collectible) does not. Putting money into a house can increase the value of the home, but putting money into car will not.
The important thing is to know when to stop throwing in good money after bad. Don’t let a car drain your money too much. Think of all of the repair costs you have spent and what you think you will spend. If it is more than getting a new car, then time for the old car to go!
The Worst Investment?
There is a popular saying when people are thinking of or have owned a boat: “The two best days of owning a boat is the day you buy it and the day you sell it.” Unless you love living on a boat or use it frequently, the cost to maintain, store, and enjoy it are quite high! If you own a boat, any unexpected expense should not be unexpected!