None of us can anticipate all of our expenses. Every stage of life brings a whole new set of unanticipated needs. Even after identifying every outflow you think you might have, there will still be significant unexpected costs. For this reason, we recommend constantly budgeting for financial surprises in an Unknown Budget.

That being said, there are several large expenses which can be anticipated and prepared for even though they are irregular and the timing of them unpredictable.

In 2015, the PEW Charitable Trust analyzed the frequency and impact of household financial shocks . Among households surveyed, 30% stated that, “A car, truck, or SUV needed a major repair or replacement” during the past 12 months.

Major car repairs are one of the most common upsets to a family’s finances. Even though they are common, they are also almost always surprises.

David’s last memorable car repair was having the power steering break on his 16-year-old Subaru Outback when he was within a few miles of home. First, he called the tow truck and then he called his granddaughter so she could come watch the tow truck when it arrived.

Megan’s last memorable car repair was a flat tire, engine failure, transmission failure, and ABS brakes failure that each occurred over a 2-year time period for her 18-year-old Dodge Caravan. Her family then bought a new-to-them used car so they’d have a back-up second car.

This is the financial shock of a major car repair. It is the most common financial shock with 30% of households reporting such an event within the last 12 months.

David’s first Kiva loan was to Jehiner, a 26-year-old living with his parents in Chiclayo, Peru. He drove a taxicab but needed $725 (2,000 Peruvian soles) to repair his cab. Edpyme Alternativa, the field partner, loaned him the money. Kiva was asked to backfill the loan so the field partner could make another loan. It took Kiva about 10 days to find 29 users willing to loan $25 each. Jehiner had 14 months to repay the loan. Because of the loan, he could continue to earn a living rather than being unemployed. Jehiner must not have had an emergency budget allocation.

A GoBankingRates study found that 69% of Americans have less than $1,000 in savings and 34% have nothing at all.

The average car repair bill is about $600 and happens on average every year. This type of emergency should not be a surprise. If you wanted to budget for car repairs, you could easily set aside $50 per month for auto repairs.

While $600 is the average, car repair bills can easily reach $2,000 to $3,000, which is what the PEW study found was the average household financial shock.

A blown head gasket might cost $2,000. A broken camshaft might cost $3,000. A bad transmission might cost $4,000 to $5,000.

We admit that neither of us are knowledgeable about automotive repair. As a result, we often worry that a mechanic might be taking advantage of our lack of knowledge. However, we are in good company. About 2 out of 3 U.S. drivers do not trust auto repair shops, and probably for good reason. They fear that the shop will recommend unnecessary services, overcharge for services, or perform the repairs incorrectly. They usually have these fears based on negative past experiences. Meanwhile undercover stings have found many disreputable auto repair shops.

Finding a shop that is honest compensates for your own lack of knowledge. In our case, we are willing to pay a little bit more in price if we believe the shop is an honest one so that we can rely on their recommendations.

The American Automobile Association (AAA) suggests that you look for a repair shop before you need emergency repairs. They suggest that you ask family and friends for recommendations, but they also have an index of AAA Approved Auto Repair facilities which can be searched by zip code.

After living in Charlottesville for 28 years, I (David) think my current shop is one of the most honest shops and did not want to change. I used the AAA site to look up repair facilities in my zip code and to my surprise the shop I am currently using is the only one listed within 10 miles for my zip code. That validation made me decide to include the recommendation of using the AAA approved list in this article. The AAA website explains:

The AAA Approved Auto Repair program is designed to help drivers identify trustworthy repair shops. “Facilities meet AAA standards by undergoing a rigorous investigation conducted by Automotive Service Excellence certified inspectors, including quarterly inspections and annual re-certifications that ensures high professional standards for technical training, equipment, cleanliness and customer service.

If you are unsure if a repair is necessary, ask your mechanic. If you are still unsure or you think you are being overcharged, you can get a second opinion from another car repair shop. Second opinions may cost a little bit of money, but it might also bring some peace of mind that you are not being lied to.

Before a breakdown happens, the best budgeting expense is to make sure that you take care of your car. Changing the oil and filter regularly may save you the most money on future emergency repairs. Much of this savings will never be noticed simply because you won’t have to replace your engine. A basic principle of budgeting is to take care of the things you own to avoid continually having to replace them. The cost of poor maintenance is most expensive when it comes to an automobile.

If your car repair is excessively expensive, you may decide repairing the car is not worth it. Perhaps the cylinders or the engine need repairs and it is going to be very expensive. You can start by comparing the cost of the repair against the value of your car if it were repaired. You may decide the repair is worth it. Or you may decide you would be better off getting a different car. But just because you need a different car doesn’t mean you need a new car.

New cars lose $3,000 to $4,000 of their value each year during the first several years of ownership. If a new car is the alternative, repairing your current car will compare very favorably to losing thousands of dollars every year due to depreciation and changing consumer preferences.

If you must get a different car, consider getting a used car as the savings can be significant. If your budget is tight yet you need a different car, get a very cheap car for $3,000 or less and drive it until you can get your finances back in order.

Also, with today’s used car services, you can shop nationwide. If you can find regional savings, you can purchase a used car from across the country and have it driven to your front door.

If you are trying to budget for car repairs, budget both for annual expenses and for your next replacement. Divide the cost of a used car by the estimated number of years left in your current car to get an estimated annual savings for car replacement. For example, if you might buy a $5,000 used car next and your current car has five years left in it, that would be saving $1,000 per year towards unknown car replacement needs.

On top of this, you should also add in $600 or more per year just for general repairs. In this example, that might be a total of $1,600 per year of generic car savings.

If budgeting thousands of dollars per year for unexpected and unknown car repairs seems excessive, you will understand why unanticipated expenses can catch many families unprepared.

Photo by Steinar Engeland on Unsplash