Unexpected Expenses?

[braumeister]

I suppose I'm overly cautious/conservative, but unexpected expenses are why I have 2-3 years expenses in my cash (easily and quickly obtained) bucket. If something comes up, that amount diminishes for a while. No problem -- that's what it's there for.

Another little mind game I've always played is that whenever I use something like FIRECalc or its cousins, I always enter just 80% of my actual portfolio. That gives me confidence that I'm really OK even if things get sour.

[Corporateburnout]

Quote:

Originally Posted by braumeister Another little mind game I've always played is that whenever I use something like FIRECalc or its cousins, I always enter just 80% of my actual portfolio. That gives me confidence that I'm really OK even if things get sour.

I over inflate my spending by 10K/year when I use these calculators to give me a peace of mind.

[ElizabethT]

I have a hard time understanding 'unexpected expenses' in general. Roofs leak, water pipes explode, appliances break, medical stuff happens, cars need to be repaired and eventually replaces. That is what insurance and accrual buckets are for (or your version of an accrual bucket).

Even divorce happens, which while certainly not expected, could also be withstood via our very conservative fixed expenses run rate.

In general, we plan for the worst even as we hope for the best.

[mpeirce]

Quote:

Originally Posted by ElizabethT I have a hard time understanding 'unexpected expenses' in general. Roofs leak, water pipes explode, appliances break, medical stuff happens, cars need to be repaired and eventually replaces. That is what insurance and accrual buckets are for (or your version of an accrual bucket).

Rather than mess with accruals, what I use my reserve category for that. I know the appliances won't last forever, but that the washer happens to breakdown today is "unexpected".

As Donald Rumsfeld might say, replacing appliances is an expected unexpected expense. Then there are the unexpected unexpected expenses like the cat developing a growth that cost some money to get taken car of.

[ElizabethT]

Quote:

Originally Posted by mpeirce As Donald Rumsfeld might say, replacing appliances is an expected unexpected expense. Then there are the unexpected unexpected expenses like the cat developing a growth that cost some money to get taken car of.

I would argue that a pet getting sick should not be an unexpected expense. Unhoped for certainly, but not unexpected.

Edit: Correct me if anyone thinks my figures are off, but when considering adopting our last dog, I used an annual run rate of $1,000 for food, shots, grooming, flea treatments and medical. Unused funds rolled to the next year for 'unexpected' medical expenses. Given the expected lifespan of most cats/dogs, that added up to @$15,000 over the lifetime of the pet.

[Rustic23]

I had a little problem with this thread. Most of the things mentioned are not unexpected. Even medical expense should be expected, just not when. Many houses in Houston are flooded. Unexpected, shouldn't be. Not the first time, and if you live in Houston, you should have flood insurance. However, I guess acts of nature might qualify of unexpected, but we do carry insurance, so maybe we do, on some level expect one.

I can see that the timing of some of the items could be unexpected, but if you own a home, you should expect to replace the roof if you live in it long enough. Same with appliances.

Having said that, it is good to consider expenses out of the ordinary. I fully agree with the statement that many do not plan for these. However, many would have the same problem if they continued to work. My parents, father worked, mother worked at home, (5 kids). My father, due to age and health, was no longer to work. SS supplied for daily expenses, but, when the roof came due, the five kids took care of it.

[Fedup]

It doesn't rain in California. We have a drought. Expecting leaky roof? More like expecting earth quake, not rain. Heck, there is a song about it, it goes something like it never rains in Southern Califorina..


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[Katsmeow]

Quote:

Originally Posted by ElizabethT I have a hard time understanding 'unexpected expenses' in general. Roofs leak, water pipes explode, appliances break, medical stuff happens, cars need to be repaired and eventually replaces. That is what insurance and accrual buckets are for (or your version of an accrual bucket). Even divorce happens, which while certainly not expected, could also be withstood via our very conservative fixed expenses run rate. In general, we plan for the worst even as we hope for the best.

It is a matter of how much to plan for. Of course, you have to plan for those kinds of things to happen but it is unreasonable to plan for them to happen every year. For example, several years ago we spent $8000 to clean up branches and yard after a hurricane (we had a $10k deductible so no insurance for this). Now, that wasn't totally unanticipated that something like that could happen. But, if I had planned retirement based upon that happening every year and I planned for every other thing like that to happen every year, then retirement would never happen.

Every year I do a budget and each category has some room in it for some of the irregular expenses. So, for example, the medical category is based upon an appointment that is a little higher than average but isn't catastrophic. As it turns out last year we more than blew through due to medical expenses for a family member that were quite high. We met our out of pocket max which is quite unusual.

The house maintenance category certainly has money it for typical repairs and maybe replacing an appliance, but it wouldn't cover $8000 to clean up the yard after a hurricane.

To cover the relatively rare, but high I do have an irregular expense category. That is several thousand dollars that I put in there for stuff like this. This category can roll over from one year to the next. And, some years I don't use all of it. Again, this is going to cover most irregular expenses. For example, if we hit the out of pocket max this year we have enough allocated between medical care and this category to cover it. But, if we had several unusual, high value things occur all in one year then it might not all be covered.

[ElizabethT]

Quote:

Originally Posted by Katsmeow It is a matter of how much to plan for. Of course, you have to plan for those kinds of things to happen but it is unreasonable to plan for them to happen every year. For example, several years ago we spent $8000 to clean up branches and yard after a hurricane (we had a $10k deductible so no insurance for this). Now, that wasn't totally unanticipated that something like that could happen. But, if I had planned retirement based upon that happening every year and I planned for every other thing like that to happen every year, then retirement would never happen. Every year I do a budget and each category has some room in it for some of the irregular expenses. So, for example, the medical category is based upon an appointment that is a little higher than average but isn't catastrophic. As it turns out last year we more than blew through due to medical expenses for a family member that were quite high. We met our out of pocket max which is quite unusual. The house maintenance category certainly has money it for typical repairs and maybe replacing an appliance, but it wouldn't cover $8000 to clean up the yard after a hurricane. To cover the relatively rare, but high I do have an irregular expense category. That is several thousand dollars that I put in there for stuff like this. This category can roll over from one year to the next. And, some years I don't use all of it. Again, this is going to cover most irregular expenses. For example, if we hit the out of pocket max this year we have enough allocated between medical care and this category to cover it. But, if we had several unusual, high value things occur all in one year then it might not all be covered.

I will give you that an annually reoccurring natural disaster might certainly qualify as an 'unexpected expense' given that our earthquake insurance policy here in California has a hefty 15% deductible. After the second occurrence we'd very likely be looking to relocate!

In general though, most of the references to 'unexpected expenses' that I hear/read about are for those things that should be anticipated to fail or wear out over time. I find it puzzling that when they do just that, they are perceived as unexpected.

[RobbieB]

From time to time I break teeth. I have very little cavities / decay, but I guess my teeth are harder / more brittle? Dunno.

Up to 5 crowns now at about a grand a pop. The last one I "popped" a month ago.

[Fedup]

I never had a roof leak in my life of all the houses that I bought. So of course it's unexpected. I'm nearly 60. I've had at least 4-5 big earth quakes in my lifetime in California. Yeap, I call it unexpected expense, YMMV.


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[Options]

Quote:

Originally Posted by ElizabethT I will give you that an annually reoccurring natural disaster might certainly qualify as an 'unexpected expense' given that our earthquake insurance policy here in California has a hefty 15% deductible. After the second occurrence we'd very likely be looking to relocate! In general though, most of the references to 'unexpected expenses' that I hear/read about are for those things that should be anticipated to fail or wear out over time. I find it puzzling that when they do just that, they are perceived as unexpected.

You make a good point, and in my case, yes, unexpected expenses are budgeted for (as much as is possible?). The February root canal/crown this year was more like an unwanted expense, but it didn't break the bank. In fact, over the course of my life, I've always recovered from "unexpected expenses" and see no reason why that should change in retirement. A financially conservative mindset plays a big part in that. I have no intention of being caught "swimming naked when the tide goes out", to apply Buffet's reference.

[Corporateburnout]

Over the first two years of retirement we spent 16k and 17k respectively for medical and dental services after averaging 7K over the 5 prior years. We budgeted 12K for medical and dental out of pocket expenses because we anticipated some dental work but not 17K over two years. So that was "unexpected".

Although our medical spending was higher than expected it was by no means catastrophic and did not affect our retirement spending.

[Mulligan]

I never gave a thought about my teeth being a potential money drain on my stash.....Until I joined this forum.... I always have been a thorough brusher and flosser, but since joining here its almost become a part time job.


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[rodi]

I had money in the budget for the full deductible/OOP - but I really hoped to not spend it all.... last year was an expensive year to have a HDHP for our household. Even with this - we managed to come in under our planned spending... probably because the LBYM instincts kicked in and we tightened the belt to compensate for the unexpected medical expenses.

I have a significant chunk of cash set aside for "unexpected expenses"... Plus an untapped HELOC if anything really unexpectedly huge came up.

[Options]

Quote:

Originally Posted by Mulligan I never gave a thought about my teeth being a potential money drain on my stash.....Until I joined this forum.... I always have been a thorough brusher and flosser, but since joining here its almost become a part time job. Sent from my iPad using Tapatalk

I can relate to the part-time job aspect. I am paying for years of neglecting my teeth when I was younger and making a mistake I didn't know I couldn't afford to be making. Now I am in preservation mode, and it's taking a lot of time, attention, and a lot more money than I would like to be spending.

I have been doing a lot of reading on venture capitalists lately and they all seem to espouse a central theme (of many), which is that investing (and life) isn't about getting everything right, as much as it is doing as little wrong as possible. It is the things we get "wrong" that come back to bite us. Actions and inactions all have consequences, immediate and otherwise, as well as unintended consequences. It's also the magnitude of what we get right and what we get wrong that matters. In my case, neglecting my teeth was quite the wrong thing to do.

[Bir48die]

In my budget I have three categories that I will build up each month: auto expenses, home repair and medical costs. Whether I use them or not I will continue to accrue to cover.

As far as a complete surprise there was January when I put my son into a 30 day residential and 30 day outpatient drug rehab program. Out of pocket was more than substantial. Luckily I had gotten a $15k bonus just before I retired which help defray some of these costs. Kind of goes in line with other posters that many times it comes down to family issues.

[Mulligan]

Quote:

Originally Posted by Options I can relate to the part-time job aspect. I am paying for years of neglecting my teeth when I was younger and making a mistake I didn't know I couldn't afford to be making. Now I am in preservation mode, and it's taking a lot of time, attention, and a lot more money than I would like to be spending. I have been doing a lot of reading on venture capitalists lately and they all seem to espouse a central theme (of many), which is that investing (and life) isn't about getting everything right, as much as it is doing as little wrong as possible. It is the things we get "wrong" that come back to bite us. Actions and inactions all have consequences, immediate and otherwise, as well as unintended consequences. It's also the magnitude of what we get right and what we get wrong that matters. In my case, neglecting my teeth was quite the wrong thing to do.

I have just been lucky. I would always brush the hell out of them when younger. I just loved the feel of clean teeth. Sometimes I would brush 10-15 minutes when younger while watching tv, ha! But I have been and always will be a "Sugar King". I love candy! But I never liked the sugar film left over, so usually brush right after gorging on sweets. I have been very lucky. The thought of a dentist drilling into my jaw to implant a post makes my stomach turn...

[Fedup]

I guess I've been spoiled. Home repair=husband's job. He can fix almost anything. He doesn't give up. But we do pay for the cost of the parts.


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[RE2Boys]

I would not call it unexpected, it would happen sooner or later, but after many years of virtually no repairs or replacements, so far this year:
1. January.....washing machine quit.
2. January.....a week later the deep freeze quit.
3. February....and a month later the dryer motor quit.
4. March.....microwave acts crazy. Got the spare from the camper.

I'm am today ordering a new keypad for the m/w as it is an undercabinet model, much easier to fix than replace.

While all the above (except the 8 year old m/w) are appliances each over 20 years old, did not expect such a bunched together failure rate. Sufficient reserve funds to handle but what a PITA this winter has been. And no consistency in how stores price the same model. While shopped Sears, local appliance stores, Home Depot, Lowe's, and HHGregg, for each, the freezer was from Sears, dryer from Lowe's, washer from Home Depot.