Dealing with unexpected expenses

There are times when it seems no matter how much you plan, some unexpected expenses come along to bust your budget. There are the obvious emergencies that everyone plans for and creates an emergency fund for (everyone nod yes), such as a sudden job loss or emergency medical expenses. But then there are the other unexpected home and auto expenses we sometimes forget to account for. A leaky roof, leaky wallet!

Just this week, our air conditioner broke down on one of the hottest days of the year. Normally, we wouldn’t have bothered, since we’re nearing the end of the summer, but we were concerned about our new week-old baby. So I bit the bullet and called the company that sold us our AC unit only 2 years ago. But, because it was a Friday of a long Labour Day weekend, they wouldn’t be able to come out until at least Tuesday and were quoting big bucks, just to come to the house.

So I called someone else who was able to come right away. They charged me $79 for the service call, which was slightly more reasonable. Another $170 just to do a leak test, which I agreed to. They found a leak. So, another $270 to refill the gas, and a whopping $400 in labour to replace a part that was still UNDER WARRANTY (obviously labour was not included)! Over $1,000 later I got my AC fixed – almost half the cost of my AC unit. They had me cornered – if I had to call another company I’d have to pay them for the service call, plus another leak test! Ahhh!

Then everything started to happen. Our washing machine started making a weird rocking noise. I heard the toilet leaking. One of the burners on my stove refused to shut off (for a while). Then, just the other day, my 12-year old Nissan Altima let out a little cough and lit up the battery replace, service engine and parking brake lights (without the parking brake even on). I’m saving up for a new vehicle, so I really don’t want to spend another dime on this one. I wish I could be making this stuff up. But luckily, nothing has gone completely broke, so far. And thankfully I have a contingency plan, just in case any other unexpected expenses arise.

Planned obsolescence / appropriate durability

Regardless of whether it’s marked or not, every product you buy today has an expiry date. In one of my early design classes, I remember a prof, discussing how every product is, or at least should be designed with what he called ‘appropriate durability’ in mind. Basically, products should be designed so that they last, but not so much that they last too long.

Many companies wouldn’t be in business if they offered products that never broke down, didn’t need any servicing and didn’t need to be replaced with a newer model, just a few years down the road. I find it interesting how everything always seems to break down a year after the warranty is up. I only had a one-year labour warranty on my AC unit. When I first bought it, I tried to negotiate for two and even called many companies, but no one would budge. I guess now I know why.

Breaking down the breakdowns

Whether a car, any home appliance, even your roof. You can bet they won’t last forever. You might not know the exact date, but you can make some assumptions. Your car is over 10 years old with over 350,000 km. You have a 15-yr old fridge that’s starting to make strange humming noises. Everyone else in your neighbourhood is replacing their roof. There are usually warning signs.

Sure there’s the possibility that these items can break down sooner (like my 2-year old AC unit – I’m not bitter), but that’s why it’s important to break down your breakdowns. Essentially prioritize what’s most important. While it’s important to have an emergency fund to protect from things like job losses, you should also be putting aside a set amount for the unexpected expenses that are mostly, well… to be expected.

• List all the items in and around your house that may soon need to be replaced. What are the obvious signs? Age? Strange noises? (Hint: do not list family members).
• Prioritize your list. What is in the most desperate need of replacement/repair? Right now, I have a roof, a newer car, and replace drafty windows on my short-term list.
• Put a price on all your to-do list items. Research. Talk to people. If, for example, you need to replace your roof (your first hint, hopefully, is seeing all the people on your street replacing their roofs). Talk to those who’ve had it done and estimate the cost of getting your own roof replaced. Or whatever it may be.
• Start a contingency fund. Set aside a certain amount to be transferred to your savings account(s) to meet these certain goals. And if you have an account at ING, you can even label all your accounts according to the specific contingency saving goal. If you don’t have an ING account you can sign up for one here (just make sure to use my Orange Key: 14209126S1 – or it gets all screwy if you don’t – kidding!).
• Revisit your insurance coverage. There may be times unfortunately when there are some large unexpected expenses that a small contingency fund couldn’t possibly cover. But for everything else there’s insurance: for your life, your health, and your property (in case of a fire, or serious damage). Insurance rarely covers everything and in many cases, it might not even cover half, but although premiums can be expensive, having none may cost you even more in the long-run.

Unexpected expenses are to be expected

Emergencies happen, but there are things you can do today, to sleep a little better tomorrow (without splurging on 800 Thread Count Egyptian Cotton). Having money set aside for contingencies has saved us (I can’t ignore the fact that it’s also helped that we haven’t had to make any type of debt payments other than our mortgage in years).

The last thing you want to do when your financial situation is already tight is be hit with another surprise. Don’t put it off! If you’re finding it difficult to save money from your paycheque, revisit your current expenses and see if you can find savings there. Call your insurance company, call your utility companies and pour your savings back into a savings account allotted for these unexpected expenses and start planning today.