The UK spends £25 billion a year on unexpected costs – that’s a lot of money that wasn’t planned for! Despite being told to expect the unexpected, over half of us simply don’t have the financial leeway to be able to budget for these sorts of surprise costs. So, why do unexpected expenses happen? And, what are the three simple things we can do to prepare ourselves in case of a financial emergency?
What are unexpected expenses?
Unexpected expenses are out of the norm events that can, quite literally, take you by surprise. Our own insights show that over three quarters (76%) of Sunny customers borrow to cover these sorts of costs. These things tend to fall into two categories – the out of the ordinary but not entirely unpredictable, like car breakdowns, replacing lost or stolen items, home or contents repairs and sudden travel – and the rarer and harder to predict.
This second type are usually the kind you hope you’ll never encounter, or think will never happen to you. The costs associated with being off work due to illness, other medical expenses, and even vets’ bills, when a family pet becomes ill or injured. The emotion connected with this type of cause for an unexpected expense can make it difficult to imagine facing such a situation. This makes it hard to plan what to do if they do happen.
It’s important to remember that unexpected expenses happen to everyone, and can happen at any time. The average UK salary is around £26,000 a year, so being left short or unable to cover an unexpected expense happens to more people than you may think. Knowing this, is it surprising that a variety of people from all walks of life occasionally need financial support?
What should I do if I have an unexpected expense?
We all know to expect the unexpected, but planning for it is a little harder. It’s easy to look back and see what you should have done to plan and prevent an unexpected emergency situation. But that doesn’t help you in the moment, when you have an unexpected cost to pay for. However, there are a few things you can do to help yourself in a crisis, or help you to be ready when the unexpected strikes.
1. Try not to panic
In a crisis, it’s normal to panic and try to find the quickest solution to the problem that’s caused the expense. However, the quickest way may not always be the most cost-effective. Take your time researching options. Look at reviews for local tradesmen, and try to get quotes so you can compare. Many local communities now have Facebook groups and online forums that provide information on local tradespeople, reviews, and contact details. If you choose to use credit to pay for an unexpected expense, make sure you weigh up credit options or providers to find a solution that is as quick as possible without costing you over the odds.
2. Talk to people
You may be surprised to learn that over two thirds of people have to pay out on unexpected costs each year. So when you’re hit with a sudden bill, know that you are not alone. Talk to family, friends, and those you trust to gain advice and a fresh perspective on the situation. They may also be able to provide recommendations on how to resolve the issue from their own experience.
If you don’t feel comfortable talking to close friends or family, which many of us don’t where money is concerned, you can reach out to online communities or websites such as Citizen’s Advice Bureau’s financial support page. The NHS also provide advice on how to cope with financial worries.
3. Expect the best but plan for the worst
Once the crisis is over, it’s time to think about how you can prevent yourself from being in the same situation again the next time the unexpected rears its head.
Arranging insurance can seem like an added headache at the time you make a new purchase. However, it can save you bigger headaches in the future by giving you some protection in the event of future breakdowns and repairs.
When purchasing any big or precious item it’s worth speaking to the supplier about insurance options as they may have a deal on offer. You can also shop around on sites like MoneySupermarket to find the best deals on home, car and life insurance. In any case, it’s worth checking what your policy will cover, for example whether or not valuable jewellery or electronics that you take out of your home are covered, and if there are any exemptions.
If you are unsure of the different types of insurance out there or what you may need, the Money Helper has lots of useful information that might help.
And never forget – if you are struggling to cover an unexpected expense or with money more generally, help is available. Check out StepChange‘s site to find out how they could help you.
What do you think about preparing for unexpected expenses? Let us know in the comments!
