6 Tips for Prepping for Unexpected Expenses

You can do all the right things—make and stick to a budget, watch your spending, put money into savings—and unexpected expenses will still crop up. But with a little planning, you’ll be better prepared for whatever life throws at you.

Unexpected expenses are something most Americans will experience at some point in their lifetime. Here are some fast facts about unexpected expenses from the Federal Reserve based on 2023 data:

• 23% of adults had major, unexpected expenses
• 17% of adult had debt from medical care
• 32% of adults said they would not be able to pay an expense of $500 using their current savings

Saving for unexpected expenses takes discipline and a concrete plan but it’s a great safety net to have. Check out the tips below to get a better idea of how to prepare for the unexpected.

1. Create an emergency fund
An emergency fund is something you can rely on when the going gets tough. There’s no set amount to strive for, but most people try to have three months’ worth of expenses socked away for a rainy day. Make a goal and try to save money each month. Better yet, use online banking to set up automatic deductions from checking into savings.

If you want to get an idea of how much money to store for a rainy day, Nerdwallet has an Emergency Fund Calculator available.

Getting started with an emergency fund can be difficult, but even just saving a little will put you ahead. According to Bankrate, 1 in 4 Americans don’t have any emergency savings.

2. Take a closer look at your spending

Make a list of all of your monthly expenses: rent/mortgage payment, gasoline, internet, cell phone and so on. What can you afford to cut back on—or cut completely? Is there a certain streaming service you only use once in a blue moon? Can you rent audiobooks from the library rather than purchasing them with a paid subscription? It doesn’t have to be forever, but little cuts here and there can make a difference in the long run and help you save.

Saving money is the most important factor when you’re trying to allocate funds to an emergency savings account. Staying motivated to stick a budget can feel overwhelming – check out some tips for staying motivated to achieve your financial goals.

3. Take on a side hustle

We’re not saying you need to juggle two full-time jobs, but a side hustle can help you bring in a little extra income. Maybe you love making jewelry—can you sell your creations on Etsy? Are there any freelance gigs you can take on? How about pet sitting or dog walking? Put any extra money you earn into your emergency fund so it’s there when you need it.

Around 40% of American have a side hustle according to Forbes – so you would not be alone if you chose this option.

4. Negotiate with credit card companies

If you carry a credit card balance, you already know that interest rates can be a beast. Contact your credit card company to ask about lowering your interest rate or monthly payments and erasing late fees. It won’t eliminate your debt, but it’ll make things easier to manage until you’re back on your feet.

If you do want to pay off credit card debt, here are a few tips to get started:

• Using a debt settlement can help. They typically call creditors to negotiate bills on your behalf.
• You can also negotiate directly. You may be able to lower interest rates for a period of time.
• Credit counseling companies also may be able to help you come up with a debt management plan (DMP).

5. Ask your employer about a paycheck advance

Some employers offer paycheck advances for work you’ll do in the future. Contact your human resources department to find out if it’s something your company offers.

6. Shop for insurance

Insurance is a great safeguard in an emergency. Take some time to review your policies and shop around. Could you pay less for the same—or better—coverage with another company? Do you really need that extra life insurance policy? Shopping around is a great way to reduce your spending.

Some insurance companies will also have special offers or savings for new customers. See if there is anything you can take advantage of, and use the deal to save some money in the short-term.

The bottom line

No matter how you choose to prepare for unexpected expenses, it’s important to take whatever money you save and funnel it into your emergency fund. Every little bit counts, and you’ll be surprised how quickly it adds up. And if or when the day comes that you need to dip into your savings, you’ll be glad you began saving when you did.

Schedule an appointment today to meet with a banker and discuss the best options for your emergency fund. At WaterStone Bank, we’re here just for you!