Life has a way of catching us off guard – and not in a pleasant way. Often, these unhelpful surprises end up costing lots of money and threatening to throw our carefully-planned budgets out of whack.
In this article, I’ll list 5 of the most common unexpected expenses and provide some tips for preparing yourself.
Definition of unexpected expenses
Unexpected expenses are simply those you didn’t see coming. Typically, they arise due to legitimate misfortune you couldn’t have reasonably predicted, such as a sudden medical diagnosis or natural disaster.
In addition to the difficulty of predicting when – or even if – situations like these will arise, you also can’t really foresee their cost, which makes budgeting difficult.
It’s worth pointing out, however, that the definition of an unexpected expense isn’t universal.
Many people find themselves caught off-guard by expenses they should have predicted but didn’t, for whatever reason. This can include things like routine car maintenance and a hefty tax bill.
In this article, I address both types of unexpected expenses. In fact, as you’ll see, the line between the two is even fuzzier than you might think given how even seemingly random events like a car accident carry statistical likelihoods you can use when planning.
5 common unexpected expenses (and how to plan for them)
The ideal approach to preparing for an unexpected expense varies depending on its type. Here are 5 common examples, in no particular order.
1. Car repairs
Cars are expensive. You don’t stop paying for them once you drive off the lot, either. As you put more and more miles on a vehicle, it will require increasing amounts of maintenance. Additionally, if your vehicle is ever damaged in an accident, you may find yourself spending thousands of dollars for repairs depending on your insurance situation.
Typical cost of wear-and-tear repairs
According to a report from automotive market research firm IMR, here are the most common car repairs and their associated costs.
|Type of work||Typical cost|
|Oil and filter change||$35-$75 (oil change)|
$5-$15 (oil filter replacement)
|Wiper blade replacement||$56-$89|
|Air filter replacement||$57-$90|
|Scheduled maintenance||$53-$94 at 40,000 miles|
$224-$323 at 100,000 miles
|Brake repairs||$263-$294 (pad replacement)|
$259-$298 (shoe replacement)
$406-$559 (rotor replacement)
|Basic engine tune-up||$150-$1,000+|
|Wheel alignment and balancing||$116-$145 (alignment)|
Your insurance policy will not cover these costs since you’re responsible for routine maintenance on your vehicle.
Of course, the fact that these repairs are seen as “routine” doesn’t change the fact that they catch many people off-guard. After all, many drivers aren’t inclined to spend money at the mechanic’s shop if nothing is very obviously wrong with their vehicle. This means issues go unchecked and can slowly become more severe until something “randomly” (emphasis on the quotations) breaks.
Typical cost of accident repairs
When it comes to repairing your vehicle following an accident or vandalism, the costs can be much higher. Here are five common post-accident auto body repairs and their associated costs, according to Insurance.com.
|Type of damage||Typical cost to repair|
|Deep paint scratches||$1,000-$3,500 (basic vehicle)|
$7,000 (luxury vehicle)
|Cracked windshield||$110 (crack repair)|
$410 (windshield replacement)
|Suspension damage||$488-$597 (strut replacement)|
$225-$285 (ball joint replacement)
$5,000+ (full suspension replacement)
|Read end damage||Few hundred dollars to $10,000+ depending on damage|
Thankfully, car insurance can save you from bearing the brunt of these costs yourself. There are some important caveats to mention, though.
First, your car insurance policy likely comes with a deductible.
According to American Family Insurance, the average deductible is $500. However, many people choose higher deductibles (i.e. $1,000 or $2,000) in an effort to save money upfront on their insurance premiums.
Whatever your deductible is, you’ll need to cover the cost of repairs up to that amount before your insurance company kicks in any money. This means there’s little sense in filing a claim for repairs costing less than or slightly more than your deductible since you won’t get much help yet will be straddled with the consequences of filing a claim.
That brings me to the next caveat. Even if your insurance policy helps cover some of the repair costs following an accident, you’re not off the hook financially.
According to The Simpler Dollar, insurance premiums can rise by as much as 61% following an at-fault accident. Even if you’re not at-fault, The Balance reports a typical rise in premiums by as much as 16%.
The bottom line? Car accidents cost lots of money and can devastate your finances if you don’t plan ahead (and most people don’t).
How to prepare for unexpected car repairs
1. Research and budget for common issues associated with your vehicle
Wear-and-tear on vehicles is more predictable than you might think. I’d recommend using a website like RepairPal to get familiar with your make and model’s common issues along with the typical repair costs. Forums like r/MechanicAdvice are also very helpful. Just do a search for your vehicle’s make and model to see what issues other owners are having.
Once you have an idea of the maintenance costs and intervals associated with your vehicle, start planning ahead. For example, if you’re approaching a mileage level at which you know a $500 issue tends to pop up, start saving.
2. As your vehicle gets older, budget for a replacement
As your vehicle gets older, the cost of regular repairs will essentially exceed its value. Research how long your make and model typically lasts and budget for a replacement as the upper limit approaches.
This will help you avoid the “my transmission just broke and now I need to buy a new car, which I wasn’t planning for at all” syndrome.
3. Budget for an accident every 18 years
While accidents are a bit less predictable than wear-and-tear, you can still rely on data for a rough idea of when you’ll experience one. Thankfully, a certain type of company spends billions of dollars predicting the frequency of car accidents – insurance providers.
Their data indicates the average driver will have an accident resulting in a claim roughly every 18 years, according to Insurance Panda. Therefore, it makes sense to budget for accident-related costs (including your insurance deductible and a premium spike) at that interval.
You can personalize this by considering your driving habits and how they affect your insurance premiums. After all, your premiums are a reflection of the risk your insurer associates with you. If your risks are much higher than average, consider budgeting for more frequent accidents – and vice versa.
2. Home repairs
A house is another big-ticket item that can burn a hole in your pocket. As with the previous section on vehicles, let’s split our analysis of the costs between routine and emergency repairs.
Typical cost of home maintenance
Here are some of the most common types of home maintenance and their associated costs per visit, according to HomeAdvisor.
|Type of work||Typical cost|
|Water softener service||$100-$300|
The frequency with which you’ll incur these costs varies depending on your home’s size and age, with older homes unsurprisingly requiring maintenance more often.
Typical cost of emergency home repairs
No matter how well you maintain your home, things will eventually break. Here are some of the most common culprits and their costs, according to HomeAdvisor. I’ve also included the frequency with which homeowners typically incur these major unexpected expenses, linking to the source in each case.
|Type of work||Typical cost||Frequency|
|HVAC replacement||$5,000-$10,000||10-15 years|
|Electric panel replacement||$497-$1,769||25-40 years|
|Roof replacement||$5,372-$10,967||12-75 years|
|Exterior siding replacement||$5,000-$14,050||15-50 years|
|Sewer line replacement||$1,073-$4,054||50 years|
|Flood damage cleanup||$1,163-$4,861||Varies|
|Dishwasher replacement||$370-$1,500||10 years|
How to prepare for unexpected home repairs
1. Prioritize and budget for maintenance
Regular maintenance tasks should rarely sneak up on you if you’re being proactive. Get in the habit of researching the typical maintenance schedules for items in and around your home.
By keeping up with these schedules, you’ll reduce the likelihood of items breaking down and requiring emergency replacements (which, as you can see in the chart above, are quite costly) prematurely.
The oft-cited 1% rule encourages homeowners to budget that percentage of their home’s value for maintenance each year. Speaking with Forbes, HomeZada co-founder John Bodrozic expanded on this, saying that 1% is appropriate for houses fewer than five years while 4% is suitable for properties 25 years and older.
2. Budget for the replacement of aging items in advance
Major unexpected expenses can greatly exceed the 1%-4% threshold. As such, it may make sense to save for the replacement of major items like your roof and HVAC system separately.
Refer to the previous table for a rough idea of how often you’ll incur various major house-related expenses. If you know those items are approaching the point at which they’ll require maintenance, start saving. The further in advance you start, the less disruptive this saving will be to your daily budget.
3. Maintain a home insurance policy
While home insurance won’t cover routine maintenance costs, it can help you deal with catastrophic damage arising from incidents such as major storms and floods. Again, as with car insurance, keep in mind you’ll need to pay a deductible and any claim will likely result in higher premiums.
4. Shop around for contractors
You can save a considerable amount of money by getting quotes from multiple contractors whenever your home needs work. Generally, you’ll want to get quotes from no fewer than three providers before making a decision.
3. Medical expenses
Nobody plans for a sudden major illness. When it strikes, the toll on your body, mind, and wallet can be tremendous. In the United States, having enough money for treatment can, unfortunately, be a matter of life and death, making this type of unexpected expense particularly devastating.
Typical cost for emergency medical treatment in America
Here are the costs associated with a few common emergency medical procedures, according to CostHelper.
|Emergency room visit||$150-$3,000|
|Post-heart attack hospitalization||$21,500|
|Post-heart attack bypass surgery||$70,000-$200,000|
Typical cost for medication in America
While the following costs may not accompany dire emergencies like those in the previous section, they’re still often the result of unexpected diagnoses that need to be dealt with. For each drug, I’ve hyperlinked my source for its cost.
|Type of medication||Typical cost|
|Cancer treatment||$100,000 per year|
|Insulin||$210 per month|
|Synthroid||$132 per 90 days|
|Fentanyl patch||$9.40 per unit|
|Antidepressants||$4-$1,992 per month|
How to prepare for unexpected medical expenses
1. Get the right health insurance
In America, getting sick can be incredibly expensive. The median household earning less than $70,000 per year – according to the U.S. Census Bureau – would be financially devastated by an illness costing hundreds of thousands of dollars per year to treat.
Thankfully, health insurance exists and can reduce the cost of treatment substantially. Millions of Americans receive coverage through work or private policies. You’d be wise to review your policy’s terms regularly to ensure its appropriateness for your situation.
If you don’t have a health insurance policy or would like to make a switch, check out this article from NerdWallet for some detailed tips on choosing a plan.
2. Consider saving for medical costs in a health savings account (HSA) or another appropriate vehicle
Even if you have health insurance, it’s likely a major illness will incur additional out-of-pocket costs you’ll need to deal with. As such, you should consider setting some money aside.
Whether it makes sense to do this in a health savings account (HSA) or simply as part of your emergency fund depends on your situation. Speak with a financial advisor for more information.
If you don’t have insurance, setting money aside is even more important. Healthcare costs can be unpredictable and even a few thousand dollars can help you mitigate a disaster.
3. Take care of yourself
You know that classic saying, “an ounce of prevention is worth a pound of cure?” Take it to heart. By exercising regularly, avoiding bad habits like smoking, and watching what you eat, you can reduce your chances of suffering a serious medical emergency that threatens your life and finances.
Beyond this, make sure to check in with your doctor regularly. By catching ailments early on, you can potentially reduce their severity.
For most people, taxes are a relatively simple affair. Employers deduct a sizeable chunk from every paycheck and send it directly to the tax authority. Then, every spring, people file their tax returns and get a refund.
Sounds simple, right? What could go wrong? Well, if you’re self-employed or the payroll department at work makes a mistake, it’s possible to end up owing the government thousands of dollars come tax season.
Tax brackets in America
Here are the federal personal income tax brackets in the United States, according to the Internal Revenue Service. This should help you figure out your tax rate for the year.
|Income bracket||Tax rate|
Keep in mind that America has a progressive tax system. In other words, someone earning $86,375 doesn’t pay 24% on all of their income. They pay 12% on everything between $9,950 and $40,525 then 22% on everything between $40,525 and $86,375.
Tax brackets in Canada
Here are Canada’s federal personal income tax brackets, according to the Canada Revenue Agency.
|Income bracket||Tax rate|
Canada also has a progressive tax system.
How to prepare for unexpected taxes
1. Do a rough calculation of how much you should be paying in taxes for the year
Use the charts and tax authority links above (along with your own research) to get a rough estimate of how much you should be paying in federal personal income taxes for the year.
If the amounts being deducted from your paychecks aren’t enough, speak with your company’s payroll department. It may make sense to keep the extra money in a separate account for tax season or – if you don’t trust yourself – have your payroll deductions increased so you never see it.
If you’re self-employed, you really need to plan carefully. Most likely, none of your taxes are being held at the source, which means you’ll have a heft bill to pay come tax season. I dealt with this for about four years and made sure to set a portion of each paycheck aside for taxes.
2. Work with a tax preparer
While it’s super easy to file your own taxes, the advice you’ll usually get from a professional is well worth the cost. I spend roughly $130 with TurboTax Live Full Service every year and my accountant always provides plenty of little tips for optimizing my taxes. I know I’ve saved thousands of dollars by taking this approach!
5. Job loss
The effects of losing your job can be devastating. If you’re among the millions of people living paycheck to paycheck, it can bring your bill payments to a screeching halt and leave you many thousands of dollars in debt within a matter of months.
How to prepare for job loss
1. Take your job seriously
While layoffs are sometimes unavoidable, I’ve seen employers move mountains to keep dedicated workers around during even the worst of times. Often, this means giving the boot to people who never took their roles seriously.
The lesson here? Make sure you’re in the first group. While it won’t save you every single time, it will certainly decrease your likelihood of getting axed. Even if you do end up losing your job, people at your old company will be so much more willing to help you land well if you were competent and pleasant to work with.
2. Don’t sit around waiting to get fired
It’s often not hard to tell when things just aren’t working out for you at a company. The smart thing to do in this situation is to begin looking for other opportunities. Don’t let yourself get caught off guard.
3. Know the statistics
According to the U.S. Bureau of Labor Statistics, the median worker spends 4.6 years with a particular employer before leaving for one reason or another. Meanwhile, a report from Randstad indicates it takes an average of five months to find new work.
Use this knowledge to your advantage. When planning your finances, account for the possibility you might be unemployed for five months roughly every 4.6 years.
4. Constantly work on upgrading your skills
It’s not uncommon for workers to get complacent and stop growing once they’ve been at a particular job for a while. This attitude can make it difficult to maintain a competitive edge among other job candidates.
To avoid this, you should constantly work to develop new skills. This may even mean training for an entirely new role in a more stable industry. Check out this article for a list of 25 recession-proof jobs, many of which you can train for online.
An emergency fund: The ultimate strategy for dealing with unexpected expenses
Truth be told, the list of unexpected expenses you could potentially incur in life is endless. The five examples I’ve listed just happen to be the simplest when it comes to looking at statistics that can help you plan ahead.
To prepare more broadly for unexpected expenses, you really can’t beat an emergency fund. Most experts recommend keeping enough cash to cover three to six months of expenses. In addition to covering you in the event of job loss, this amount will go a long way towards paying for unexpected expenses you might incur.
You can always adjust this amount to suit your needs, however. For example, I recently bought a car and bumped my emergency fund up to an eight-month buffer to account for potential maintenance issues.
Of course, this is a lot of money. Most North Americans don’t have a few hundred dollars lying around, let alone the many thousands that would be required to keep a three to six month emergency fund.
However, you should absolutely make this a priority if you don’t already have an emergency fund. Check out this article for some tips on saving $10,000 within a year. You can adjust the number to suit whatever size emergency fund works best for you; the principles and strategies will still apply.
Too late for an emergency fund? Here’s what you can do
If unexpected expenses are knocking at your door and you haven’t had the opportunity to plan ahead, here are some ways to generate cash relatively quickly:
Check out this article for detailed descriptions of each strategy.
Unexpected expenses can wreak havoc on your emotions and budget. I hope this article has helped you rethink a few common unexpected expenses and make a plan to better prepare yourself for them.
The general idea here is that – whenever possible – you should use available data to consider likely outcomes and plan for them. Once you start thinking like this, you’ll find very few expenses catch you off guard.
For more financial planning-related topics, check out these articles.