‘The best laid plans of mice and men’ is a common quote and one that reminds us that we can’t always plan perfectly for what’s around the corner. Even if you are the most meticulous planner in the world, you will find there’s always a chance for things to go occasionally wrong and you can’t ever completely rely on the itinerary you’ve set out for yourself.
Never is this truer than with finance. Often we budget thinking we’ve covered every possible scenario, only to find that the boiler breaks the very next day, that we’re invited out on a night out that we can’t possibly say ‘no’ to, or that we injure ourselves and need to take unpaid leave from work.
The question is how you plan for the unexpected. How you account for the unaccountable, and how you avoid going broke thanks to life’s little surprises. Here are some good steps to take that can help to keep you afloat even when these surprises do come along.
Leave Room in Your Budget
The first thing to do is to respect that your budget will never be completely accurate. Things will always come along to upset the flow of your cash, which is why you will want to leave some room in the budget for ‘unexpected expenses’. Decide how much you think you might need that you can’t plan for… and then save more than that.
Keep a Rainy Day Fund
Likewise you should always make sure you have a little money saved away for a rainy day. This will help you to pay for all kinds of things and if you never have to use it then it will be a great nest egg for your kids, or a great holiday in your retirement.
Another thing to do is to insure yourself for every possible scenario. Insure your belongings, insure your health and insure your employment. Health insurance can help to pay for a new wheelchair platform lift,whereas insuring your contents is important to prevent you from losing all your belongings in a fire.
Don’t Stretch Yourself
These little hiccups always have a tendency to come along just when we really don’t need them and just when we would potentially struggle to afford them. Point is then that you shouldn’t be putting yourself in a position where you couldn’t pay for an expense if it did come along. Avoid ever stretching your finances so thin that the slightest hiccup would leave you broke!
While you can’t plan precisely for every eventuality, it can make sense to think about as many scenarios as possible. Call these contingencies and imagine numerous different futures for yourself and your family. Now think about what you would do in each of these situations in order to get by and then budget for how much that would cost.
Worst case scenario you may have to take out a loan. If you’re sensible about this it needn’t be the end of the world though, so do your research and consider going to the ‘bank of Mum and Dad’ first.