Why Does One Unexpected Expense Set Someone Back So Much?

[gracreavix]

For someone tying to build his of her financial life from scratch, the first step isn’t savings, especially for a person who earn average or below average income, because 60-85%, if not 90% of that income would be taken by necessary expenses like feeding, rent, taxes etc.

The first step for an average or below average earner to gain financial stability is:
1. Increase his/her cashflow: with the increase of cashflow, you can then be more flexible with segmenting you finance into savings, emergency funds etc.

2. Let your expenses not grow with your income: This is one is a very important but difficult rule to obey. But if you can obey this rule for a substantial amount of time, then you’re one step closer to financial stability.

3. Learn how to grow money (Invest, Invest, Invest): This last one is also very important, because my definition of financial stability is knowing how to grow and multiply the one at hand to earn you more, and not spend it.

You can be very careful with your finances and you still don't make anything due to emergencies or unforeseen circumstances. Life can be crazy when real life happens. I have seen people lose their entire life earnings just in a minute of natural disaster. You may plan all these, save money in cash or in Bank or buy investments or so. One sick family member can exhaust every amount you have saved because you will not keep money and watch your person to die off while you save your money.

I won’t entirely agree with you Decimetre. Firstly I won’t dispute the fact that majority of the things you mentioned are true, unforeseen circumstances can happen, this is the game of life and things we don’t plan for happens sometimes.
But the question now is, “Would you now make poor financial decisions or don’t strive for financial stability because life do happen? “ No.

Health is the first wealth. This is why you may be earning the same amount with somebody and remain poor while your colleague is rich and doing well. You can be making investments, when emergency conditions happen, they will still have to go and sell their investment to use and sort the situation on ground.

Learning how to grow money is a good advice also but if a real life situation happens, you may withdraw down to your capital to use and save your self from the moment.

Yes you can be earning same with your friend and he/she would be doing more better than you financially, everybody experience life differently and in their own unique way.
But that doesn’t still zero away the chance or becoming financial stable. Intentional moves to grow in finance could still work regardless of where you stand in life.

[Jaycoinz]

It is always important to plan ahead but while you are doing that it is possible that you might end up having an expense that might be triple of what you actually thought of, this is capable of setting you back because you would spend everything you have just to solve that issue.

[stepwilli]

I used to spend money recklessly and I don't save up for emergency in the past because as a boy back then I didn't have any responsibility of taking care of anyone other than myself I used to make little savings in case I want to buy anything for myself, anytime I have an emergency I don't always have what to fall back to, to solve the emergency other than depending on my little savings to solve the emergency, and this habit sometimes makes me to fall back to square one, but now that I have grown to a man and I have a family to take care of, I now spend only on necessary things, save more for emergency so that my emergency money will be enough to take care of my emergencies without me struggling or depending on the money I have saving you for months to buy something that will make my wife and kid life easier.

As a young boy, we still have our parents to rely on. Also, a young boy's responsibility is only to enjoy because once he turned into a mature and family man, this is where things gets difficult. If we are already earning as a young boy like we are a child star on the TV's, sometimes our parents can still keep our money as a form savings for our future. So that once we grow up, we won't struggle anymore.

Basically saving as a young man is easy than saving as an adult because we have lots of responsibilities already even if we are mature enough to think of saving. I think savings and emergency fund have a similarity. This is where we pull out money if we need to avail something, something that can not handle by the spare money in our pockets/wallets.

[Cheema02]

I learnt my lessons on not saving without accounting for sudden emergencies, the only one I haven't budget is extreme medical emergencies that might live a whole in my pocket. What I normally do is separate my income into 3, the first is for me and Families basic needs like food, rent and all of that, the second most important is my bitcoin investment where I keep a fraction of my income [I do not touch that one no matter the circumstances until I reach my goal], then the last is for emergencies like hospital runs, car break downs, etc. It helps in reducing the pains of this outcomes

It's very important to segregate income, because when you have a plan to manage finances, you separate portions of your income. When you wisely separate your spending, then make a portion for emergency funds and also separate some money for investing, then in reality you manage it. But in all respects, we should have separate funds for extreme medical emergencies, which could be important. In this way, we should go for health insurance because it gives financial security in harsh conditions. If we don't have enough money, then it's impossible to secure life in hospitals. If we have proper health, then we are able to do anything. So, health is preferable to money, because if we lose money then we have a chance to rebuild it, but if we lose our health then it's impossible to regain it.

[Proty]

 The reason while people struggle with unexpected expenses is lack of plans . People should always plans ahead for unforeseen circumstances that may likely arise in the future by setting aside some some funds that will be used for solving such problems. It is only those that doesn't save for an emergency that will find themselves in a situation where by they will be find it difficult to tackle unexpected expenses when they arise because of lack of plans. The best way to be financially stable is to invest in different assets and also to increase your income.This will help you to be able to build wealth and also save for emergency.

[Mpamaegbu]

For those who have managed to build financial stability, what helped you most? Was it increasing your income or you just find another way to protect yourself from unexpected cost?

No one is immuned to that. None. Unexpected expenses will always occur. It's even worse when there's a family to carter to. With only oneself, it can be easily managed but not when one has other mouths to feed. As a family man, sometimes I just want to curtail expenses for the week, especially when I spent much the previous week but then, the kids come back from school and drag in more expenses for me. We can't help it. It looks like that's all what humans were born for. Always taking care of expenses until we're deceased. It's a sad reality.

[Victorybit1]

I won’t entirely agree with you Decimetre. Firstly I won’t dispute the fact that majority of the things you mentioned are true, unforeseen circumstances can happen, this is the game of life and things we don’t plan for happens sometimes.
But the question now is, “Would you now make poor financial decisions or don’t strive for financial stability because life do happen? “ No.
~snip

Yes you can be earning same with your friend and he/she would be doing more better than you financially, everybody experience life differently and in their own unique way.
But that doesn’t still zero away the chance or becoming financial stable. Intentional moves to grow in finance could still work regardless of where you stand in life.

Honestly this thought unforeseen event destroying all your life's work is alarming and sometimes it makes it difficult to start saving up but like you said it better safe than sorry because what are the chances of that disaster happening to you. Plus even if you lose all your savings, with the idea of habit of saving, it would be easier for you to recoup that money.

[programmer3666]

Have you ever tried to save money for several months just to get something very important to acquire or accomplish but only for one unexpected expense to take out most of what you have saved, if not all? You have tried hard to limit unnecessary spending, you pay every necessary bill and try to save small whenever you can the suddenly something bad happens, your car breaks down and needs repair, medical bill comes up or something if emergency just happens. Before you know it, you are back to square one, where you started.

The frustrating part is that you may not have even done anything wrong because sometimes life just happens and while someone else might be able to handle the same expense without even stressing, it or may have to go and borrow money or put other plans on hold just to get through it. This is one reason for me to think that financial stability seems to be harder to achieve than it actually looks. It can’t just be about knowing how to manage your money, the problem sometimes is that there’s is not just enough money left after you have taken care of your daily need.

For those who have managed to build financial stability, what helped you most? Was it increasing your income or you just find another way to protect yourself from unexpected cost?

My elders used say something like, poor man don't have the luxury of savings, problems will always find the money no matter where you keep it, I sincerely believe some people just have natural grace, which is why they tend to get easy access to money or some huge financial payments. You will see someone struggling and hustling day and night but all he can boost of at the end of the month will be less than $100 but another person will just seat at the comfort of their room and make millions without breaking a sweat. But some of these people that earn easily hardly share the updates or guidelines to others.

[kasep]

You see, the bad thing here isn’t that these emergencies happened, because these are actually the inevitable occurrences of life, especially as an adult, Emergencies will always surface every now and then. Now the bad thing is not expecting them to come up and it’s even worse when you fail to prepare for these emergencies and only prepare and plan for your essential expenses, that’s where you start seeing them as an obstacle to your success or financial growth.

Since we know that these occurrences are inevitable and we don’t know when they’ll happen, having an emergency fund in place automatically becomes the most logical thing to do, imagine having an emergency fund in place before starting to save that money, instead using all or most part of that savings, you simply just deep into your emergency fund and sort it out.

I agree, with the emergency fund we do not have to use capital funds or other borrowed funds.  we can use emergency funds when circumstances that can not be avoided when things happen-things that are not desirable and unexpected in our lives that often happen. that's the importance of an emergency fund. but it is often overlooked. the question is, when there are more funds, what should be prioritized ? raising capital or saving for an emergency fund ?

[Samlucky O]

For those who have managed to build financial stability, what helped you most? Was it increasing your income or you just find another way to protect yourself from unexpected cost?

Surely it's not really easy, we as humans face a lot of challenges on a daily basis, and we find one way or the other to scale through it. It is not that people make provisions for emergency or for unforseen circumstances, but when ever it happens we would surely find solution to it, it might be that we don't have the available money presently but as a man you must figure out a solution. The truth is that sometimes having multiple sources of income does not guarantee that you are free from such situations, they may still happen when you don't have a dime. The only thing is that you look for a way out then pay up later using your source of income.