My husband and I sit down every year for a major financial checkup. Through the year, we go over our monthly budget. When it comes to financial planning, we've found there are always those hidden costs and surprise expenses that catch us off guard. In some cases, we receive an unexpected windfall, but most of the time we are dealing with not-so-pleasant financial surprises.
Rising costs of homeowners insurance
When we first purchased our single-family home, we paid very little in property taxes. It turned out that we were taxed only on the land the first year instead of the land and the home. The second year we were hit with a not only our current year's taxes but the additional money we owed for the first year. Our mortgage payment went up unexpectedly as our mortgage company collected a higher "escrow" amount. Even when our property taxes went down in recent years, our homeowners insurance suddenly rose. To offset this expense, we have set aside an extra $100 a month so we can make a one-time payment toward escrow if we are hit with a higher bill.
Saving money for personal income taxes
In addition to unpredictable property taxes, we also have to plan for tax bills that tend to sneak up on us. With so many changes in terms of tax deductions every years, it's hard to estimate what we will need to pay. In order to handle unexpected tax bills, we started paying quarterly taxes. By making those four extra payments to the IRS every year, I feel more confident that I'm meeting my financial obligations to the federal government.
Planning for medical expenses
Most of the time, we don't have many medical bills. But one year I fell off a chair while trying to dust the lighting fixtures. After going to the emergency room, I found out I had a concussion. But my real headaches started after I received the medical bills. In order to deal with unexpected medical expenses, I decided to start a health savings account through my job. My company adds $500 a year to the account, which provides a major boost to my savings for medical as well as dental care.
Paying for travel expenses
Although most people expect to pay for airline tickets to attend weddings and funerals, we didn't include other travel expenses in our budget. When my son moved to another state to attend college, I had to start budgeting for our visits. Meanwhile, my husband became more involved in Magic the Gathering tournaments that involved travel. As our children get older and my husband becomes better at his card games, we anticipate even more money being spent on airline tickets and hotels.
Even though we try to keep our lifestyle inflation in check, we can't always avoid certain expenses. My husband and I have learned to be very flexible when it comes time to devise our yearly budget. This year, we are saving 10 percent of our income to provide a financial cushion for the unexpected.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
More from this contributor:
- Personal Budgeting
- homeowners insurance