.

[Forskaren]

- the car price is 0.64% of our total net worth.

I don't think that an unexpected expense of 0.64% of net worth is really that much if that is needed to get an income that pay it back fast.

If you have invested your net worth to make it grow, a decrease of net worth of 20-30 % could easily happen in a bad year.

[Gilberto de Piento]

I have the same issue. Two months ago it was $300 for the dentist. My take is that I can't know what the expenses will be but if I track my finances for a while I can see that there will always be something and I can get a rough estimate of what that will cost on average. I would put 10% of my expenses in this category of expenses that are specifically unpredictable but generally predictable (if that makes any sense).

So you can either plan for it that way, or simplify your life until all these expenses are gone (if you don't need a laptop you won't need to replace it when it breaks). Of course, removing all these potential expenses from your life can have their own costs (if you don't have a laptop you won't have to replace it but you might have to go to the library every time you want to use a computer).

Some may argue that the expenses you list are predictable. Laptops don't last forever, etc.

[chenda]

I find a ~ 10% contingency is about enough for the predictably unpredictable expenses.

[Stahlmann]

change paradigm
maximize degrees of freedom
minimize wants
increase [cash/in]flows
outsource expenses/troubles

wear a hat and retire early

sorry for being too general
sorry for being jacob-bot too

[phil]

I keep track of expenses on durable goods such as cars and computers in a bookkeeping way, which basically means the following:
- on purchasing an item, add the item's resale price to your net worth
- each month (or whatever period you keep track off), include the loss of value of the item in your expenses.

I find this method helpful because it brings to the fore the long-term cost of purchasing items. And in the OP's case it might help to bring down the category of unexpected costs.

[EdithKeeler]

I have found that most "unexpected expenses" probably shouldn't be unexpected.

By which I mean, things like a laptop and other appliances have a finite life, so it's not really unexpected that you will have to replace them at some point in the future. I go thru a laptop about every other year. A car won't live forever, or be maintenance free forever, and if you have a company car, it probably should be in the back of your mind that the company could take it away at some point or you could lose your job and thus the benefit. Me, i know that both of my houses are going to need new roofs before too long, so I budget a little every month for when I finally have to do it. Same with vet bills--I have 4 dogs, and of course shots, etc. are anticipated, but I had a lot of boarding costs this year that were unexpected--travel for work--and so I'm budgeting a bit more for next year for that.

I'm approaching this from the standpoint of someone who does risk management for a living, but I think it's important to sit down and think about what COULD happen--you might have a health issue that will eat up your deductible, you could have a major repair on the house and car, etc. Not that I'm saying that you have to have enough put away for every worst case scenario there is and anticipate they all happen the same year, but putting aside money in a "slush fund" when you need it is useful. Or--have a credit card with limits available, and be willing to take out some money from other investments to cover it should it be needed. Personally, I do a combination of both.

I'm not sure why "next year" child care will be an unexpected expense. Sounds to me like you're expecting it....

[Seppia]

When you live an efficient lifestyle (by efficient I personally mean: just avoiding incredibly stupid and unnecessary expenses), the "expected unexpected" is a large part of the yearly budget.
I always forecast a 15% buffer, and it falls short more often than not.

Bottom line is: if you consistently have unexpected expenses, you're just doing your budgeting wrong

[The Old Man]

Bottom line is: if you consistently have unexpected expenses, you're just doing your budgeting wrong

Its reasons like this that a person needs to carefully track there expenses. I've been on a trial run for the last couple years on my expected retirement budget. There are always unexpected expenses. The big ticket items for me have mainly been medical-related. You need to include a fudge factor for these unexpected expenses.

[Scott 2]

I budget 1300 a year for medical expenses, 2000 a year for home/car care. 1/12 that amount automatically transfers to a separate savings account each month. I target a year's expense in the separate account as my buffer. If I am under or over by more than 50%, it's time for corrective action. That could be changing the auto transfer amount, doing some preventive care, or a one time transfer from my cash reserves to the account.

It's pretty essential to be good at predicting this stuff if you are going to run a very frugal retirement budget. The financial resilience is low, when you've already cut out the waste, and have barely saved enough.

[OTCW]

Worst year for me included:

Property damage not covered by insurance: $18.5k
HVAC System: $3.5k
Roof: $3k
Car Replacement: $18.5k
Theft loss: $500

Well more than 2x my annual average 'normal' expenditures.

I had everything but the property damage and theft anticipated and cash available. Those two items slowed down my ERE plan, but I covered them in cash out of my brokerage account. People kept telling me how bad they felt for me, etc, but because of ERE, it really wasn't a big deal in the grand scheme.

[ebast]

I keep track of expenses on durable goods such as cars and computers in a bookkeeping way, which basically means the following:
- on purchasing an item, add the item's resale price to your net worth
- each month (or whatever period you keep track off), include the loss of value of the item in your expenses.

I love phil's suggestion. It really depends why you're tracking expenses of course: making sure there's enough cash in the bank at the end of the month vs modeling your expected expenses for your retirement require different approaches (there's a reason companies publish separate income & cash flow statements after all).

I've been frustrated with swinging monthly expense levels depending on when I pay a yearly bill or make a purchase, so like a good accountant following the Matching Principle, I recently geeked out like phil was recommending with an inventory of all my clothing, estimated frequency of use, expected life (& maintenance cost) given my repair skills and set up a depreciation schedule for it to get an idea of how much I am currently paying per wear. All works out to something like 2$ a week. Fine, good, approaching what I spend on library fines, but it also had a surprising benefit beyond just tracking cost reduction targets: I make and justify more rational decisions in expensive up-front purchases. The usable life and frequency of use of a thing makes a huge difference on cost if you depreciate it out whereas it's usually too easy otherwise, at least for me, to fall prey to deciding on sticker price alone. Expensive boots costing $300 dollars work out to cost way less than cheap running shoes that wear out fast and resist repair, and don't even mention dress shoes you wear three times a year. Yeah we all know this but it can be a helpful exercise to get the numbers that prove it. Shame to say but I have bought three pairs of running shoes in the past two years but no boots! Bookkeeping says: shown you have not wisdom in minimizing outflows and outsourcing troubles.

True, 12 out of 12 of the last authors* I read managed to do fascinating things and contribute new work to the world without probably ever having on hand a full itemization of socks, but it's a guilty systemizing satisfaction to me anyway to model the heck out of something with way more tools than anybody'd expect.

I will be releasing my full 10-K at the end of the quarter.


* no 'Minimalists' were included in this list

[steveo73]

When you live an efficient lifestyle (by efficient I personally mean: just avoiding incredibly stupid and unnecessary expenses), the "expected unexpected" is a large part of the yearly budget.
I always forecast a 15% buffer, and it falls short more often than not.

Bottom line is: if you consistently have unexpected expenses, you're just doing your budgeting wrong

I think the thread topic is spot on. We have these expenses every year and they kill us simply because they are unexpected. In stating that I agree with your point.

This year we bought my son a laptop. He dropped it and it broke so we bought another laptop. We also had to replace a window covering at home. These expenses added up to $2 grand. That is a lot of money considering we spend about $40k per year. There are also other little expenses. For instance my daughter dropped her laptop but we could get that fixed for a couple of hundred dollars. The year before it was a new fridge. We've gotten rid of one car. Car expenses can come out of seemingly nowhere.

Now we have an emergency account (we call it a bills account). I consider that spending so it's not counted as part of our savings but we save it. Typically that money disappears each year on some expense.

I don't like stating I'm going to save x amount and then withdrawing from that money. The way we do it works though because I consider that money spending money.

When I retire I want an emergency fund just sitting there that I don't consider part of my portfolio. It is probably less efficient but it'll save me withdrawing from my ER portfolio that I don't want too.

[vexed87]

This year we bought my son a laptop...
...There are also other little expenses. For instance my daughter dropped her laptop but we could get that fixed for a couple of hundred dollars.

I used to have a habit of dropping things I wanted upgrading too Sounds like you need to invest in weighty and/or anchored desktops to stop this recurring expense

[Ydobon]

A lot of lucky kids! I didn't get my first shitty desktop until I was 15, I spent my own savings to buy it and my parents never provided me with a computer or mobile phone. With 5 children at home, they would have been in the poorhouse before long While they definitely don't fit the mould of ERE types, they will be retiring soon with pensions and 4 houses owned outright, thrift (and luck) made up for the fact that they never earned much until the last few years.

[George the original one]

LOL, those of us who are old enough didn't get personal computers as children because they didn't exist, though we might have a slide rule or, later, a pocket calculator.

[George the original one]

OK, so back on the subject of dealing with unexpected expenses. These usually fall into a couple categories:
1) Emergency (life threatening or well-being) - dig fast into your stash and dig as deep as you need to.
2) Maintenance - replacing the fridge or your car's broken water pump or the fifth flat tire on your bicycle this year.
3) Life changes - adding a car because your work commute changed or moving because your family just increased.

Emergencies are just that. No budgeting, just deal with them. If your life is full of emergencies, then you need to change your life. Some people use emergencies to justify their ego. Some people try to classify non-emergencies as emergencies to justify their decisions/expenses. If you're not insured for home replacement and major health expenses, then you need to have a self-insurance plan.

To decrease your maintenance expenses, own less to maintain and make sure you own quality rather than consumer. Realize that most of what you own will need replacing at some point, so somehow you need to budget for replacement costs, especially if you're skimping on maintenance!

Expenses for life changes should be one-offs. These would come out of your stash. Sometimes you'll need to budget for maintenance/replacement costs as a result. If you have lots of life changes, then you need to slow down and follow a plan (I was going to write you need to change your life if you have too many life changes, LOL!).

***
Make sure you TRACK your unexpected expenses. Budgeting doesn't work if you don't know the amounts you need.

***
And, finally, you also should budget for wants & desires. People who don't budget properly for them often try to justify them by miscategorizing their wants & desires as unexpected expenses. Thus they can't stay within any budget "because".

[steveo73]

A lot of lucky kids! I didn't get my first shitty desktop until I was 15, I spent my own savings to buy it and my parents never provided me with a computer or mobile phone.

Nowadays kids need laptops. It's required by the school. These are public schools as well - i.e. government funded. We help give my kids mobile phones but they only got them when they went to high school and we don't pay for their calls. We do give them pocket money which they can use to pay for their calls. My 13 yo son doesn't work so he just buys cheap pre-paid. My 15 yo daughter does work. I think she gets a better more expensive plan. She also paid for a fancy phone.

[Ydobon]

A lot of lucky kids! I didn't get my first shitty desktop until I was 15, I spent my own savings to buy it and my parents never provided me with a computer or mobile phone.

Nowadays kids need laptops. It's required by the school. These are public schools as well - i.e. government funded. We help give my kids mobile phones but they only got them when they went to high school and we don't pay for their calls. We do give them pocket money which they can use to pay for their calls. My 13 yo son doesn't work so he just buys cheap pre-paid. My 15 yo daughter does work. I think she gets a better more expensive plan. She also paid for a fancy phone.

Is it required that they have access to a laptop, or their own laptop for use in school?

[steveo73]

A lot of lucky kids! I didn't get my first shitty desktop until I was 15, I spent my own savings to buy it and my parents never provided me with a computer or mobile phone.

Nowadays kids need laptops. It's required by the school. These are public schools as well - i.e. government funded. We help give my kids mobile phones but they only got them when they went to high school and we don't pay for their calls. We do give them pocket money which they can use to pay for their calls. My 13 yo son doesn't work so he just buys cheap pre-paid. My 15 yo daughter does work. I think she gets a better more expensive plan. She also paid for a fancy phone.

Is it required that they have access to a laptop, or their own laptop for use in school?

They need their own laptops for use in school.

[radamfi]

Next year it'll be child-care.

How is this "unexpected"?

or moving because your family just increased.

Ditto.