Planning for the unexpected is a huge part of personal finance and there are a number of ways to prepare. The importance of good insurance can not be underestimated especially health, home, and auto insurance. Life and disability insurance are big players too. Insurance gives us a chance to push some some of the risk of the unexpected off to a 3rd party. That being said, we all know that insurance doesn’t cover everything.
Most of us are pretty good at budgeting for our current and regular expenses. The biggest mistake I see is that people don’t budget for expenses that are not as consistent but almost as predictable. Car repairs/ replacing cars is a big one. We all know that all cars require maintenance and repairs. Especially older cars. It is just a matter of when. To prepare for this, people need to putting money aside every month/paycheck that is set aside for a particular expense. This way when something unexpected comes up or your old clunker finally gives out, you have a fund ready to go.
I do know, however, that it is impossible to plan for everything. And if you don’t have any emergency funds you may need to turn to debt. This is the last resort though. If possible, try to use something other than your credit card if you don’t expect to be able to pay it back before interest starts to accrue. If you have a home equity line of credit that may be a good option because the interest rate is much lower than credit cards. There are some online peer-to-peer lending sites that have pretty good rates as well. Lending Club is a one of the better ones. (I am not affiliated with Lending Club)
The most important thing is to realize that it is only a matter of time before an unexpected expense comes up so we need to be prepare now. Just like they always say, the best time to start was 5 years ago but the 2nd best time to start is right now. Take responsibility for your money and your life by saving now.