Budgeting for unexpected expenses.

Try to Budget for unexpected expenses that may arise, make a list of all of the things around your home that will probably need to be replaced at some time in the future and include it in your budget, e.g. washing machine, clothes dryer, fridge, freezer, dish washer, TV, kettle, toaster, car tyres, car service, etc.

Make a note of how much it will cost to replace each item and what you expect it's lifespan to be.

In order to calculate what you will need to put away for each individual item follow this formula:

We will use a washing machine in this example:

Let's say that the brand new washing machine you just bought cost $1000 and you expect it to last at least 5 years.

$1000/5 = $200 (per year)

$200/12 = $16.60 (per month)
$200/52 = approx $4 (per week)

That's all very well and good if all of your appliances are brand new however if they are not, you will need to take their age into account in your calculations:

If your washing machine was 2 years old and it has a life expectancy of 5 years, you will have 3 yrs to cover the cost of a new machine hence the amount you will need to save regularly will be increased somewhat.
e.g:

$1000/3 = $333 per year - you expect the washing machine to have a lifespan of 5 yrs however it is already 2 yrs old, so you need to save enough to cover the expense in the 3 yrs that you have left:

$333/12 = $27.75 (per month)
$333/52 = $6.40 (per week)


If you were to start saving for a replacement now, you may have some shortfall at the point of replacement (depending on price increases) however you won't have to foot the bill in one go or seek other alternatives to make the payment such as hire purchase/credit cards.

You would follow the same example for the rest of your long term expenses and then tally them up, this will give you an idea of how much you need to put away on a regular basis (be it weekly or monthly) in order to avoid disaster.

Create a column for your long term expenses in your budget sheet and put that amount away each week/fortnight/month (depending on the budget you have created) to decrease your outlay considerably as and when the appliances need replacing.

These steps will help you to budget for unexpected expenses saving you the heartache of having to do without.