Many times when thinking about our budget, and how much we have left-over for spending on our wants, we forget about the irregular expenses or unexpected costs that pop up. That is why having a detailed budget (with an appropriately sized miscellaneous category) along with an emergency savings fund is essential to keeping us out of debt. Let’s review some of the commonly forgotten costs that can lead to financial hot water:

Irregular Expenses (these should be in the budget on their own line or included in miscellaneous)

• gifts for friends and family
• annual club fees
• Kids: school fees, school supplies, sports/hobby equipment/uniform, fundraising, friend’s gifts, school photos, yearbook, field trips, hot lunches, costumes, valentines, etc.
• occasional taxi or public transportation
• irregular prescription drugs

Unexpected Expenses (these should be covered by emergency savings)

• paying deductible for car insurance claim
• paying deductible for home insurance claim
• veterinary bills
• car repair not covered by insurance or warrantee
• home repair, appliance repair
• income replacement after job loss or lay-off

When you are prepared for the little random costs in your life, either with a miscellaneous category in your budget or an emergency savings, you protect yourself from going into debt. You won’t need to pull out that credit card or get a payday loan because your bank account is empty. You will have the money available to keep out of the debt trap.

The biggest problem with using your credit card or getting a payday loan is when the bill comes due — how are you going to pay for it then? Where will the money come from? You may be forced to keep the balance on your credit card and pay the interest, or worse, take out a second payday loan to pay off the first which puts you in an endless debt cycle.

Having a miscellaneous savings and an emergency savings is the first step to not living paycheck to paycheck. And imagine how it will improve your stress levels! How stressful is it to have your car break down, when on top of the inconvenience and cost of the repair you don’t have the money to pay for it and need to use credit, to be paid off who knows when? With a cushion in your bank account for these expenses, you’ll feel more prepared for them and much less stressed.

Even the simple act of your child being invited to another birthday party can raise your stress over how you will pay for another gift, and you may start thinking of excuses to tell your child why they can’t go. But when you’re prepared for these pop-up expenses, you can have some money available for a gift, or even get your child involved by earning and saving the money themselves in advance.