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At some point in life we all hit unexpected speed bumps. The car suddenly needs repairs, the furnace decides to quit right before hosting the in-laws, or an unforeseen health event results in shiny new medical bills. These financial curveballs usually have one thing in common—terrible timing.
But planning before emergencies happen can help ensure these unexpected hits don't turn into financial knockouts. Here are seven smart strategies to help you plan for the unplannable.
1. Build an Emergency Fund
Spending your whole paycheck doesn't leave much room for expenses that come out of nowhere. That's why you need an emergency fund—a stash of cash set aside for true emergencies. (Sorry, a last-minute foodie tour of Mexico City doesn't count.) Experts say your emergency fund should be large enough to cover three to six months of expenses. If that seems like too much out of the gate, start smaller with a goal of $500, $1,000 or one month of expenses. Then, once you reach it, set a new goal that gets you closer to the expert target.
Emergency funds should be kept separate from your everyday spending money, not in your regular checking account. But that money should still be easily accessible if you need it right away. You probably want those funds earning interest, too. A high yield savings account is one option that checks all the boxes.
READ MORE: How High Yield Savings Work for Emergency Funds
2. Be Budget Flexible
When you create a budget to track and organize your spending (because we're all doing that, right?) you may be tempted to lock every dollar into a specific category. However, a little flexibility (like budgeting within ranges) can be helpful when unplanned costs come up.
If you need more structure, leave some room for a cushion or a "miscellaneous" line item to handle the unpredictable.
READ MORE: 50/30/20 Budget Rule: How It Works and Examples
3. Think About Insurance
Lots of us undervalue insurance—it can feel like a cost with no real benefit. But ask anyone who's landed in a situation where they needed their insurance (like the basement flooding) and you'll understand why it's an important part of a good financial plan. The right insurance coverage can help you with things like disability, serious health concerns, an accident, theft or damage to your home. You might be surprised how much a small insurance policy can make a major difference when it comes to unexpected expenses.
READ MORE: 5 Types of Insurance to Help Protect Your Wealth
4. Lower High-Interest Debt
Sometimes, borrowing money can be a smart way to meet your goals. If you're planning to borrow, try to lock in the lowest possible interest rate.
If (like many of us) you already have some high-interest debt, you're probably spending money on interest you could be stashing in your emergency fund. Work on paying your higher-interest cards down, such as with structured payoff strategies like the snowball or avalanche methods. This can also help set you up with better credit, which could lead to lower interest rates. Win-win.
READ MORE: Want to Be Debt-Free? Start with this Checklist
5. Plan for Annual Bills
Annual expenses, like insurance premiums, property taxes, holiday travel or membership fees, can be predictable but easy to overlook—until you get the bill. Although calendar reminders can help, smart money management can help more.
If possible, space your annual bill payments throughout the year to prevent a cash crunch. You might also be able to switch from yearly to monthly payments without penalty. If not, try setting up an automatic savings plan that moves a certain amount of money into a separate account every month. Then you can dip into it when you randomly get the bill for your "Secret Society of Sock Collectors" membership.
READ MORE: What Is a High Yield Savings Account? Pros, Cons and How It Works
6. Use Credit Right
A credit card can be a great financial tool. For the best options, prioritize cards with low interest rates, no annual fees and clear terms. If you're using a card for unplanned expenses, try setting a specific limit for "emergency only" charges.
Smart credit card use can help you be more flexible with your budgeting, earn rewards and even help your credit score.
READ MORE: How Do Credit Cards Work? What You Need to Know
7. Run a Fire Drill
Are you ready for an emergency? The best way to know is to run a test. Imagine you suddenly need to plan a trip (somewhere fabulous, since we're pretending) to help a friend. Practice adjusting your budget and how you would respond financially. Check your credit limit and available balance monthly, even if you're not using it. And take a look at your credit score to ensure everything looks right and your credit is in good shape.
READ MORE: What Is a Credit Score & Why Is It Important?
Planning for the Unplannable
Life's curveballs can be less stressful when you're not worried about how to pay for them. While you can't predict the future, you can be ready for it by building a few consistent habits into your routine.
And when unexpected costs come up, access to exclusive deals and flexible financing options can also help. Start shopping smarter today by visiting the Synchrony Marketplace to explore current offers.
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