Do you guys remember that episode of Seinfeld where Jerry learns he is “Even Steven”?
One of Jerry’s work gigs was cancelled, then another one popped up shortly afterward for the same night and same pay. He lost a $20 bill, then later found $20. A girl broke up with him, and he met another one right around the corner.
Everything always evens out for him.
I’ve noticed stuff like that happening to me the past few years. Mostly small things, and with strangely accurate amounts. Things like:
- I cracked my iPhone screen and had to pay $60 to repair it. While driving home from the repair store, I found some free side tables on the street and sold them online for $60!
- Last month my laptop died and I bought a new one online for $1,000. Immediately after ordering, the mailman dropped off some letters and inside were 2 targeted bank promotions. I signed up for both offers, which will earn me exactly $1,000 in welcome bonus cash!
- I got a surprise $73 discount when I was ordering some items the other day … But the win was short-lived as I found out later that my car had a parking ticket on it. Exactly $73.
I guess you could chalk these things up to coincidence, karma, or happenstance. I don’t actually think I’m Even Steven or anything.
But I do believe that even though unexpected expenses and bad things will pop up in my life, sometimes unexpected good things and money will fall into my lap, too.
Budgeting for Unplanned Expenses
Wouldn’t it be awesome if every unexpected expense were cancelled out by an unexpected windfall? We wouldn’t ever have to budget, plan for mishaps, or set aside emergency savings!
Sadly, that’s not the case in real life. We gotta have some type of plan to cover unforeseen costs. Where does that money come from? Even if we do have an emergency fund to tap into, we still need a way to top it back up after pulling money out.
“Wondering how you break down costs like “Phones.”
Is this simply the monthly plan amount? If so, should there be any consideration in this figure for an eventual phone repair and replacement? Same question for computers…and cars.
Seems like a big underestimation people tend to make in budgeting like this is forgetting the fact that towels, and phones, and modems and computers and roofs tend to wear out. Where does the money come from to replace these things?
I always come up with a low number for my basic existence when I look solely at monthly bills and expenses — but looking into the true expense of owning a thing paints a different picture.
For example, I had a fancy $3,500 MacPro that lasted me 8 years, I used it for all manner of personal and work-y things, and during that time it cost me nothing except the electricity it took to run it.
However, if I were to plan to replace the computer with the equivalent item at the end of 8 years, I would need to save about $1.20 per day or about $438/year to put toward this purchase.
If one does this exercise for their computer, phone, car and/or any/all other consumable items in one’s life, the “true cost” really starts to add up and can destroy what looks like a frugal or conservative budget on the surface.
Problem: Those Pesky Overlooked Expenses
Pretty interesting to think about. If you know a new computer will cost you $3,500 every 8 years, do you set aside $438 in your annual budget? Most people would say yes that’s a smart thing to budget for.
But what if your computer breaks down in year 6 and you don’t have enough money saved to buy the replacement? Or what if the future you in 8 years needs a computer that costs $5,000?
I don’t even know where to start with the variable expenses like towels, bed sheets, pillows and other home stuff. How often do those need replacing, anyway?
Solution: Budgets Aren’t Exact. They Need Wiggle Room
Nobody is a perfect budgeter. It’s almost impossible to predict the exact amount of dollars you and your family will spend each year.
But there are ways to keep a budget flexible to accommodate changes within the year and stay on track with our financial goals:
1. Round Up on Your Expected Expenses, and Overestimate a Little
For almost every category in my budget, I round up to the nearest hundred dollars. Or, I overestimate a little for categories that I’m not certain about. This gives us wiggle room for mistakes or unexpected price increases.
For example, my wife and I pay $90 per month for our 2 cell phone plans. I have this as a $100 line item in our monthly budget, which gives us an extra $120 baked into our annual estimate. Not a massive amount, but it could cover a small AT&T plan increase, or pay for the odd cracked screen repair. (For phone hardware replacements, we buy our friends’ old models when they upgrade, or usually they’ll just give them to us for free — we have nice friends.)
2. Keep a “Miscellaneous” Category in Your Budget for Periodic Expenses
Many years ago I started including a “cash & ATM” line item in our budget to allow me and my wife to spend a bit of cash here and there without having to categorize it. Since we rarely use cash these days, this has now morphed into a “misc” bucket. For 2021 we have $500 in it.
$500 won’t cover a huge surprise expense, but it could definitely cover things through the year like traffic fines, bank fees, insurance increases, or surprise flowers for my wife one day. 😊
3. Be Able to Scale Back Your Spending Plan in Some Areas, If Needed
Truth be told, my bare-bones budget isn’t really that bare at all. There’s a bunch of typical expenses I could cut back on. I think many people realized the same in 2020 when they were forced to cut out dining, travel, and other things they may have thought were necessary living expenses.
For my wife and I, we have a healthy travel budget ($5k), booze budget ($3k), and even a budget category for charity ($5k). If we had an unexpected emergency expense that needed thousands of dollars, like a medical bill, we could cut back in these other areas and still not exceed our annual total spend.
4. Keep an Eye Out for Extra Income Opportunities
Instead of adjusting your budget to accommodate an expense, you might be able to make a few additional bucks to help cover things.
Pick up an extra shift at work, sign up for a bank bonus or welcome offer, start a temporary side hustle, sell something you don’t need anymore, go to an estate sale one weekend and see if you can flip an item online, or pick up a freelance or tutoring gig.
There are income opportunities everywhere!
Heck, the other day I learned about this website, Cambly, that pays you $10 per hour to just chat with people online in English!
I’m convinced that the reason I’ve been having Even Steven coincidences more and more is because I’m always looking for new money opportunities. The more I look around, the luckier I seem to get!
Would love to hear how you guys handle contingency expenses in your budget. I guess it’s not a huge deal if you’re in the wealth accumulation phase of your life and have a high savings rate… But if you’re retired and live on a tight income budget, every dollar counts.
Joel is a 35 y/o Aussie living in Los Angeles and the guy behind 5amjoel.com. He loves waking up early, finding ways to be more efficient with time and money, and sharing what he learns with others. Rise Early | Retire Early!