“Spending Shocks” are large, irregular expenses. Spending shocks are the #1 reasons why budgets end up abandoned, and being prepared for large spending shocks is the best thing you can do to keep your personal finances healthy.
There are two types of spending shocks: Budgetable and Unbudgetable.
A “Budgeted” spending shock is a big expense you might only see once or twice a year, but you know it is coming well in advance. This includes things like buying gifts for birthdays or holidays, regular trips to the dentist, and shopping for school supplies.
These are unplanned expenses that you do not see coming. This includes things like car repairs, fixing a broken computer, or replacing lost/stolen items. Unbudgeted spending shocks can be devastating if you are not prepared, since they also tend to be very expensive.
There are two ways you can cope with a major unexpected expense:
Now that you know a bit more about building up an Emergency Fund, close this window to continue the game!