How to Budget for Unplanned Expenses (‘Cuz You’re Not “Even Steven”)

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.

via Giphy

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.

A reader recently asked me this question when I was talking about my very vague FIRE number and unknown future budget. This came from Jessamee Sander in NY (@jessamee):

“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.

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  1. Liz April 19, 2021 at 7:42 AM

    While my emergency fund grows, as I thankfully don’t need to touch it often, I also know there are some expenses I might need to finance in the short term. As my car ages I have some money set aside, but if heaven forbid a meteor, or tree takes it out in the work parking lot this week, I know I can get a loan. I usually try to get an inexpensive phone and hold onto it for years & pay for the unit outright. Last time to get the best deal, I had to agree for them to put the price on my monthly bill.
    There was a fire in my apt building years ago & I suffered water damage. No luck replacing towels that had worn out. Total all at once replacement, covered by insurance. And for many of those small items (not furniture) to me it wasn’t too expensive. The ones that got me were paying full price for things I normally would get on sale, like jeans or a comforter for the bed. If I had to self replace I woukd get what was essential and then revisit additional items as they were needed.
    My parents have planned well for retirement and frugal by habit, I don’t think they’ve not replaced towels or shoes etc when needed. I am trying to follow in their footsteps and hope for similar outcome.

    1. Joel April 19, 2021 at 1:17 PM

      Cool to hear Liz. Sorry about the apartment fire – but nice that almost everything was replaced! I like that you’re following in your parents footsteps. A lot of my wife and I’s frugality comes from our folks.

  2. The Millennial Money Woman April 19, 2021 at 7:52 AM

    Happy Monday Joel!

    I was so excited when I saw you say to sign up for a bank bonus to earn more money! Back in the day when I was working in corporate America, I used to take advantage of all bank sign-up bonuses, which often ranged between $150 to $300 per sign-up. All of my colleagues laughed at me and snickered behind my back, saying that I’m wasting my time and that they would never do something like that “just for $150.”

    Looking back at that time, I realized that for a $150 bank bonus sign-up, I was basically earning $50 per hour, assuming it took me 3 hours of work to gather my documents, drive to the bank, talk with the bank teller, etc. That was absolutely worth my time!

    Since I left my corporate job, HR enacted a new rule, which states employees can only transfer their direct deposits 1 time per year (while I used to do this up to 3 times per year).

    I look back on that time and chuckle.

    Thanks for sharing!


    1. Joel April 19, 2021 at 1:20 PM

      Duuuuude! My wife and I just got $400 EACH this week from the Capital One Checking Account Bonus. AND $300 from American Express Blue cred card bonus. I doubt it took 3 hours to get all these, so that’s $1100 this month for free. It’s a no-brainer activity, provided you’re organized enough to follow the rules, etc.
      Have a great week Fiona!

  3. Jason Brown April 19, 2021 at 9:44 AM

    Anytime you can reference Seinfeld in a blog is a good thing! I love it!

    Not planning for unexpected expenses if probably the No. 1 thing that gets most of us in trouble!

    I’ve always said that having an emergency fund (or savings account) is simply insurance against debt. We currently have a line item in our monthly budget for “other expenses” for $250. Most of time this is always used on something unplanned, but if it’s not we just roll it over into the next month.

    Great topic Joel!

    1. Joel April 19, 2021 at 1:22 PM

      Little things certainly add up quickly, and definitely get you in trouble if you are on a tight budget. $250 is a pretty nice amount – that can cover a lot i’m sure!

  4. David @ Filled With Money April 19, 2021 at 7:16 PM

    I always keep a “something always seems to come up” budget buffer in my monthly spending budget. It’s never failed me before so I’ve been lucky but I can only imagine what would happen if one day, the things that I’m using today actually do break.

    Even Steven, I haven’t heard of that before, ha. Maybe I should remember the next time something bad happens to me so that I can stop missing opportunities that are right in front of me!

    1. Joel April 19, 2021 at 7:24 PM

      Yep, keep looking for those hidden opportunities – they’re everywhere :)

  5. Chris April 19, 2021 at 9:19 PM

    I never understand ‘unexpected’ expenses. We budget per month for a family of 5: 50/car for repairs, 100 cash EF + 500 roth, 50 misc, 50 health unknowns, 200 house roof, 10 random kid toys, 20 bday dinners, 60 take out, 600 groceries, 30 gifts, 15/cell phone replacement, 83 vet, etc. Some of these are in rolling envelopes and keep getting bigger while others have max value caps.

    1. Joel April 20, 2021 at 9:51 AM

      Awesome, sounds like your regular budget catches it all!

      1. Chris April 21, 2021 at 8:28 PM

        Every so often we need to tweak – inflation creeps up, expenses drop off, considerations of new expenses come into play, etc — and for those times that items fall outside the scope we have the misc bucket. So far it has worked really well!

        1. Joel April 22, 2021 at 1:37 PM

          Nice! I’ve also noticed that the older I get, the easier unexpected costs are to deal with. Each year budgeting gets a little easier!

  6. Impersonal Finances April 20, 2021 at 12:44 AM

    Even Steven! I think it’s more common than we think if we keep our eyes open. And like Jerry, it doesn’t just apply to money! Love this reference!

    1. Joel April 20, 2021 at 9:54 AM

      If I recall that’s also the episode where George and Elaine switch places. He starts have successes by doing the opposite of every natural instinct, and she has a run of bad luck. Funny stuff!

  7. Chris April 24, 2021 at 10:51 AM

    I based my budget on actual expenses. I updated it every year for three years. If a budget category increased in any of those years, it became the new baseline (kinda like the rounding up that you mentioned). Because my budget is based on actual expenses over several years, it does not really matter what categories I use to capture a particular expense, it all gets captured somewhere. When I was getting ready to retire, I had to decide how I was going to account for infrequent large expenses, like a new roof or replacing a car. For simplicity sake, I just set aside a large chunk of money in a conservatively invested account that I will tap for large, infrequent expenses. In six years of retirement, I have yet to tap that account. My cars are very old but they refuse to die. The most expensive item that I have replaced is a refrigerator and I had enough wiggle room in my regular annual budget to cover that.

    1. Joel April 24, 2021 at 11:51 AM

      That’s awesome Chris. I do the same for the most part. I take last years numbers and set my new budget accordingly (except for 2020 as we had really low expenses last year for lockdown). As we get older and grow more wealth, it gets much easier and we’re almost ot the point where we can ditch our budget completely.
      Congrats on not touching your emergency bucket. I like that it’s invested and growing in the meantime too!

  8. Success Triangles April 25, 2021 at 10:03 AM

    Great article, Joel.

    One lesson everyone should be learning from the pandemic is the importance of an emergency fund. This is typically 6-12 months of living expenses in cash or CDs to cover yourself in case you lose your job.

    As far as how to handle planned expenses, here is what I do.

    *We drive our cars ten years and then buy a new one. We set aside $800 a month for the purchase of a new car five years from now. This way we never have to take on a car loan and waste money on interest.
    *Our house will need a new roof in 5 years so we are setting aside monthly funds to cover that cost ~ $15k.
    *Our water heaters are old but still working – we have $2k set aside to replace those when they break.
    *My son needs braces (~$4,500) and we have that set aside for later this year.
    *Our vacation fund is around $9k right now because we haven’t gone anywhere in a year.

    Once you are debt free and have an emergency fund, your cash flow should be pretty big. Instead of blowing it on stupid stuff, start planning for upcoming expenses and save like crazy to pay for them in cash. Avoid credit card/loan interest at all costs to make these purchases cheaper and make a vow to never go into debt again.

    Just my two cents ;-)

    1. Joel April 26, 2021 at 1:00 PM

      Cheers! I like having an emergency fund, but, once it’s tapped into there’s got to be a plan to top it back up afterwards. I like how you’re constantly setting aside money for these types of things. Looks like there’s a great amount of wiggle room in the budget. Nice list!

      Have a great week!

    2. ms.b214 April 29, 2021 at 11:48 AM

      Just one question–800 a month for the car for ten years? 96,000 dollars? That’s a nice car!

      I’m assuming that gas, insurance maintenance, etc. is in there. That being said, maybe I have really low car insurance. I’m shocked at what some people pay.

      I budget 300 a month, which after gas, car tags, parking stickers, insurance and repairs, usually gives me about 10-15 grand for a good used car every ten years. If I had any desire for a new one, I’d probably just up that by 100 a month.

      1. Success Triangles May 2, 2021 at 12:11 PM

        Thanks for the comment! We have two cars – so we are buying a new car every 5 years – while keeping each car 10 years.