By Nat Juchems

Special to the Financial Independence Hub

Our finances can be a source of stress and frustration at the best of times. For many of us, our budgets account for our expenses for the month, with perhaps a little left over for savings and disposable income. Which can make it particularly difficult when the unexpected occurs.

There are, of course, a variety of solutions to emergency situations. However, in the heat of the moment these can lead us to the financial band-aids that solve the problem in the short term, but perhaps put us at a long-term financial disadvantage. Credit card payments, loans, and financing may well be quick fixes to stressful issues, but you may find it difficult to cope as time progresses and your circumstances change.

We’ll take a look at a handful of the most common unexpected expenses that may arise. What are some useful, intelligent financial responses to these? Are there low-cost preparatory steps you can take to fend off larger-scale consequences?

1.) Medical Expenses

There’s certainly an element of injustice in the fact that people so often go into debt as a result of illness. However, the current US health system isn’t always well designed to provide adequate care without incurring huge bills. So, in the absence of complete systemic overhaul, what are your options for unexpected healthcare?

Of course, the simple preventative answer is to take out adequate health insurance. It can be tempting to just select the plan with the lowest monthly premium, but this could find you seriously out of pocket; particularly as lower premiums are usually leveraged by higher deductibles. That said, if you can mitigate this effect by investing a little from each paycheck into a Healthcare Flexible Spending Account (FSA). The funds paid into these accounts [in the United States] are deducted from your paycheck, but are not subject to tax. The amount accumulated can then be used to help pay for deductibles, co-pays, and indeed anything not covered by insurance in the event of an emergency.

If you have been involved in an accident that was the fault of a third party, it is certainly advisable to seek assistance from personal injury lawyers. While we all want to avoid unnecessary litigation, fair compensation may be obtained in order to cover your emergency and ongoing medical expenses. This may not be an adequate short term solution, so it can also be useful to find ways to minimize your initial outlay. Attend walk-in clinics in place of large hospital emergency rooms if appropriate, look into prescriptions of generic drugs rather than brand names.

2.) Funeral Expenses

None of us like to think about the passing of ourselves or those closest to us. However, we have to accept that death is one of the few guarantees we have in life. That said, for all its inevitability, death can take us by surprise; with the costs associated with it adding additional stress to our emotional pain.

Funerals are notoriously expensive affairs. When an unexpected death occurs, we can understandably tend to opt for solutions that place the responsibilities of organization on third parties such as funeral directors. It’s worth noting that these are usually the most expensive options, and don’t usually provide us with the opportunity to do our due diligence in investigating the necessity of services which drive prices even higher.

The fact is, there is no legal requirement in any U.S. state for a funeral director to take charge of planning and executing a funeral. It is perfectly possible for you to undertake a low-priced, meaningful ceremony. Cremation is usually one of the most cost-effective methods of handling the remains of a loved one, with the cost of cremation urns certainly tending to be lower than caskets. In fact, if you donate the body to scientific study, the remains are usually cremated and returned to you free of charge.

If you are set on burying a loved one, there are certainly options which can keep costs low. Direct burial — a process which forgoes a viewing in favor of almost immediate interment — can be around the same price as cremation, and does not require the additional expenses associated with preparation of the body. Also be wary of “extras,” such as gaskets on caskets; these are ostensibly to protect the remains after burial, and can raise the price of the casket by as much as $800.

3.) Vehicle Problems

Vehicles can represent one of our more substantial investments. Not simply in the material cost of the vehicle itself, but also its maintenance and ancillary charges such as insurance and road tax. It’s no shock, then, that when something goes wrong with our vehicles, it can be a costly affair. Continue Reading…