Car, furnace, appliance breakdowns: Time to rethink what we mean by ‘unexpected’ bills

It doesn’t take much to upend many Americans’ finances. A car that won’t start, a furnace that dies or a trip to the hospital can leave households struggling to make ends meet.

According to the Federal Reserve, 44 percent of U.S. adults say they would have trouble coming up with $400 to cover an unexpected expense. Even families who have more in the bank can flounder. Surveys by The Pew Charitable Trusts found that 51 percent of families with at least $2,000 in savings reported trouble paying the bills after a financial shock.

Yet it is hardly a shock if an appliance wears out or a car breaks down.

It’s time to rethink what we mean by unexpected expenses. Some bills may be unpredictable in their amount or their timing, but they’re still inevitable. In other words: If you have a car, or a home, or a body, sooner or later it’s going to cost you.

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A better approach, especially for households currently living paycheck to paycheck, is to save for the most likely costs and have some kind of Plan B to handle the truly unexpected.

Here’s how that might work with three of the most common unexpected expenses Pew found:

—Repairing or replacing a car (experienced by 1 out of 3 households that faced a financial shock)

—A major home repair (experienced by 1 out of 5)

—An injury or illness that results in a trip to a hospital (also experienced by 1 out of 5)

CAR REPAIRS

U.S. households spent an average $837 on vehicle maintenance and repairs in 2015, according to the U.S. Bureau of Labor Statistics. Most spent between 1.4 percent and 1.8 percent of their incomes on these costs.

Tuck aside $500 to $1,000 to cover a typical repair, and add to that cache as you can. Once you pay off your current car, redirect the payments into your repair fund. You can use any money you don’t spend on repairs as a down payment on your next car.

As a Plan B, keep space available on a credit card or consider a personal loan if repair costs outstrip your savings. For homeowners, a home equity line of credit may be a lower-cost option.

HOME MAINTENANCE AND REPAIRS

Maintaining your home can reduce, but not eliminate, the cost and frequency of repairs. Typical monthly maintenance costs vary from a low of $25 a month in Phoenix to a high of $83 in Boston, according to an Angie’s List analysis of Census Bureau figures. Generally, the…

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