Poll:How to pay for Unexpected expenses?

[mickeyd]

After reading this article I wondered if this group would score differently than the survey mentioned in the article.


Survey: How Do You Pay For Unexpected Expenses? | Bankrate.com

 

[Big_Hitter]

wow that's sad

 

[Car-Guy]

I may use my credit card to get the 1.5 cash back but I'll pay it off as soon as get the bill. So it really comes out of my cash reserves (savings)

 

[38Chevy454]

I may use my credit card to get the 1.5 cash back but I'll pay it off as soon as get the bill. So it really comes out of my cash reserves (savings)

Same for me, would just pay with credit card, get the cash back, and then pay off when bill is due tapping savings if necessary.

I think part of the problem is to define what is the unexpected expense limit? The $1000 used in the linked article would not cover many unexpected expenses.

 

[travelover]

I said borrow from family or friends because I love to support an underdog position.

 

[Walt34]

Rob a bank.

Seriously, we keep funds in savings for that stuff, like when the water line from the meter to the house began leaking. Took the money out of savings and wrote a check for $3,400. Stuff happens, we plan for what we can and keep some extra for what we can't plan for.

 

[PoF]

I have no doubt this group would do better than those surveyed. That's what savings are for. Hopefully, we're not early retiring too early.

 

[Meadbh]

It depends on the size of the unexpected expense. Assuming it was something I could cover from savings, I would charge it to my credit card, and pay the credit card bill in full when it came due. That would give me some time to move money around and plan my future cash flows. I would cut discretionary expenses too.

If it was a really large expense (let's say my car was totaled or the house burnt down) I would dig into savings, talk with my insurance company and use my HELOC. (I wonder what happens to a HELOC if the house burns down! Hopefully if it's properly insured, nothing!)

And there's always crowdfunding....

 

[Midpack]

The article seems to be describing a much younger crowd than this audience, they mention Millennials outright. How I deal with 'unexpected expenses' now bears little resemblance to how I handled them as a 20- or 30-something.

We pay as we go now, but we have considerable $ (about 20% of total spending) money in our budget for 'unexpected expenses.' After 4 years retired, we're finding 20% above routine spending to be fairly accurate on average.

 

[N02L84ER]

I may use my credit card to get the 1.5 cash back but I'll pay it off as soon as get the bill. So it really comes out of my cash reserves (savings)

+1

 

[pb4uski]

+1

27 yo DS recently had some car repairs and was fretting that his emergency fund was taking a hit and he would have to rebuild it. Atta boy!

 

[jkern]

I plan for unexpected expenses. If the amount exceeds my current accumulation, I take it from savings. (taking from savings almost always equals using credit card for one month). However, if the house fell down in an earthquake I would have a very different problem.

 

[racy]

"The survey shows that a very significant minority of American households apparently don't have the resources to pay for an unexpected expense of around $1,000," ....

ummm.... wondering how many constitute a "very significant minority"?

 

[travelover]

I plan for unexpected expenses. ...........

But if they are planned for, are they really unexpected?

 

[rodi]

I don't like this poll. I would have selected Pay with Credit card, Use Savings, and Reduce spending.

I'd use the credit card to get points and get the 30 day free loan. Pay it off with savings. And reduce my spending till the saving coffers were refilled.

This was demonstrated for me this last year. I budgeted for *some* OOP medical. But I hadn't planned on one son breaking his left elbow followed by his right wrist, and the other son taking a baseball to the face breaking his orbital socket and needing to see face bone specialists, eye specialists, etc... I paid with a credit card, paid the credit card off with savings. With that much cash flowing out of savings, I also cut back some on discretionary spending.

 

[Independent]

When I was working, we had an emergency fund in a MM mutual fund.
Now, we just hit the IRA.

 

[hnzw_rui]

All of the above although borrowing from friends/family is last resort. I'd take a loan from the retirement accounts before borrowing from friends/family.

Mind, $1000 would just be cash flowed.

 

[scrabbler1]

I have several layers, or tiers, of money I use to pay for unexpected expenses. For the relatively small ones, meaning anything around $750 or less, I have already built that into the cash I keep at my local bank's checking account over and above the minimum needed to avoid monthly fees. If the unexpected expense rises above $750, I "may" have to tap into other less readily available sources. Because some of my usual expenses are "lumpier," such as semi-annual car insurance premiums or estimated income tax payments, I have to budget for them a month or two in advance, carrying forward budget surpluses in the earlier months to cover them. I still reinvest any excess monthly (and quarterly) dividends from my stock and bond funds. But if an unexpected expense (> $750) comes in just after I one of those reinvestments of excess dividends, I may have to sell some shares if I don't have any new, excess cash arriving soon. That has very rarely happened since I ERed in 2008. For larger, unexpected expenses, I will usually redeem shares of a bond mutual fund whose purpose is to cover these expenses (my second tier EF). This has happened a few times since I ERed in 2008.

 

[MichaelB]

The article seems to be describing a much younger crowd than this audience, they mention Millennials outright. How I deal with 'unexpected expenses' now bears little resemblance to how I handled them as a 20- or 30-something.

I agree with this. In my 20s and 30s we had a number of unplanned expenses, mostly medical. Even though we were thrifty and saved aggressively, these ate through our savings and twice we had to borrow money. We were fortunate that my employer gave emergency loans to help cover certain expenses.

 

[Amethyst]

When I was in my early-mid 20's, I didn't own a house, so "unexpected expenses" were car or medical-related (I had some med issues).

In both cases, "Providers" often offered me discounts because I was young! I'm serious! The doctors and car fixing types even did some things for free, that they would have charged others to do. I did not plead, or even ask for these discounts. I just got them.

Karma: when I bought a house at age 28, I got energetically ripped off by everybody on all sides. Guess 28 isn't young enough for special treatment, or maybe it's just that real estate is such a cutthroat thing.

Amethyst

 

[HadEnuff]

But if they are planned for, are they really unexpected?

not if you're smart.

I may not have expected THIS to break, but I knew SOMETHING would break, because that is just what happens.

 

[old woman]

I am watching a Dave Ramsey group they are so bad with money they consider every little thing a shocking emergency. First time in their life they attempt to keep $1,000 emergency fund yet things keep going wrong, who thought that could happen?
I don't even think about things being an emergency to worry about like I got a flat tire, but on spare, buy four new tires. I used a credit card but never pay interest, I got tires for the car and truck last year and a new roof, the roof leaked but I sold some investments and paid 11K for a new roof with no wondering how I would get the money, if that didn't work I would have used my HELOC or credit card but they wanted 3% for credit card, I did get a senior discount.

 

[aja8888]

I am watching a Dave Ramsey group they are so bad with money they consider every little thing a shocking emergency. First time in their life they attempt to keep $1,000 emergency fund yet things keep going wrong, who thought that could happen?
.

We have family members who live from paycheck to paycheck (no savings). Anytime there is an expense they can't pay, it's an emergency. These are good people and work hard, but the word "save" is not in their vocabulary.

 

[HadEnuff]

I used to see a version of this often in my dental practice. Patient retires early, then needs a filling. Then complains to me that he can't afford it because he's "on a fixed income" now...

I'm thinking the guy is a putz because either he retired too early, or didn't plan on the fact that "stuff happens" regardless of how "fixed" his income may be. I have to admit, it would kind of frost me that I was supposed to somehow feel sorry for this guy who was younger than me and retired, and I'm still working because I want to still be able to pay for my life.

 

[nun]

I wanted to choose both "Use Savings" and "Reduce Spending".

Late last year I had to spend $11k on new furnaces. I just paid the bill from my bank account that held a year's spending and was waiting until the new tax year to top it up again....then the bear market started so I'm trying to avoid selling anything right now. So I'm cutting spending to get me through to September when my pension begins. I should be ok as my spending is $2k per month and that includes everything like health insurance, RE taxes etc. and my savings/rental income can support a burn rate of $3k/month. If I have other unexpected expenses I'll start taking dividends rather than reinvesting or sell TSM in taxable and transfer some Wellesley to TSM in retirement to rebalance.