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1 year ago

Everything You Need to Know About Unexpected Expenses

by Vinicius Rocha

Everything You Need to Know About Unexpected Expenses

An Overview of Unexpected Expenses

No matter how diligently we plan our finances and expenses each month, there are always going to be some expenses that we did not or cannot foresee. By definition, these ‘unexpected expenses’ hit our bank accounts over and above what we had planned for. Some unexpected expenses are minor; these can be the parking ticket or speeding fine you caught while out on a quick run, or maybe your groceries turned rotten quicker than you had anticipated. While these are not ideal, they are usually a quick fix and probably won’t derail your budget too heavily.

Other expenses can be substantially more taxing on your bank account. For example, a medical emergency that is not entirely covered by insurance can quickly rack up into the hundreds, if not thousands. These expenses do not have to break your bank: through good financial habits and access to cost-effective liquidity sources, you can ensure that you preserve your and your family’s financial safety.

Most Common Types of Unexpected Expenses

There are several categories that the majority of unexpected expenses fall under. The categories applicable to you are generally dependent on your lifestyle and whether you are single or have a family. Below are some examples of unexpected expenses categories that may cause you to have to spend some of your savings or disposable income instead of saving.

  1. General household repairs
    From time to time, houses may face maintenance issues in terms of infrastructure (roof, walls, etc.) electrical, or plumbing repairs. There are also several appliances such as fridges, ovens, microwaves, washing machines, etc. that can run faulty occasionally. These are additional expenses that have to be borne as a homeowner.

  2. Car expenses
    If you own a car, then some unexpected expenses that come up could be a breakdown of the vehicle due to age or weather conditions, parts replacements and/or other repairs that come about due to an accident on or off the road. Alternatively, you may also find that you are paying more than you had budgeted for gas if gas prices go up.

  3. Healthcare expenses
    Accidents, injuries, or illnesses that require medical expertise to treat generally occur without warning and can become expensive if the treatment is over a prolonged period and not covered by public health benefits.

  4. Family expenses
    If you have dependents that are attending university, some unexpected expenses that can come up include the costs of increasing tuition or other related expenditures. Additionally, if there is a death in the family, funerals can also be costly. In Canada, the average funeral cost is between $5,000 to $10,000.

  5. Pet expenses
    Owning a pet comes with its own set of costs such as food, vaccines, and other miscellaneous items. However, if your pet suffers an illness or injury that requires veterinary attention, that can become a material unexpected expense in the month.

  6. Natural disasters
    If your home is situated in an area affected by a natural disaster such as an earthquake, flood, tornado, etc., repairs over and above the amount covered by insurance may need to be incurred out-of-pocket. As this can become prohibitively expensive, it is often a good idea to purchase a comprehensive insurance policy if you live in an area that is particularly prone to such disasters.

Managing Unexpected Expenses: Do’s and Don’ts

When it comes to dealing with these unexpected expenses, there are some best practices that individuals and families can follow. We have broken them out into ‘Do’s’ and ‘Don’ts’ below for easy reference.


  1. Include a contingency for ‘unexpected expenses’
    When building your budget each month, it is always wise to set aside anywhere from 5% to 10% for unexpected expenses that you have to pay. This way, you are not caught entirely off guard and scrambling to gather the funds when it is time to pay for the unexpected expense.

  2. Create a ‘rainy day’ fund
    Many people save up a certain fixed amount that they keep locked away for a ‘rainy day’. This amount remains untouched unless absolutely needed. While there is no single rule that defines how much you should have saved up, a good rule of thumb is to have 3x your total monthly expenses saved up. This way, if you face an unfortunate situation such as the loss of your job, you have a 3-month cushion to conduct a job search and land a new role.

  3. Establish a line of credit
    If you have a reasonable to good credit score, a line of credit is a great option for you to have access to immediate funds if and when required. Most lines of credit provided by banks only charge interest on the amount you borrow, so if you end up not borrowing at all, you simply have to pay the setup and annual fees (if applicable) for the convenience of having a few thousand in capital anytime you need.


  1. Take out a payday loan
    A payday loan should always be an option of the last resort. Payday loans come with high-interest rates that can become incredibly expensive if they are not repaid within a few weeks or months. If you ever do have to approach a payday lender, ensure that you know the APR of the loan and read the terms and conditions extremely carefully to know exactly what fees you are liable to pay and what you are getting yourself into before you sign on the dotted line.

  2. Charge everything to your credit card
    Using your credit card for large expenditures can also become highly expensive if the repayment is not made within a month. This is because credit cards charge rates of up to 23% annually. In addition to the interest costs, outstanding debt can also hurt your credit score.

We are here to help!

If you find yourself in a situation where you need urgent, hassle-free access to capital at a rate that doesn’t break the bank, our team at Magical Credit is always willing to help! Reach out to us today to find out your options for a personal loan and get access to some of the most competitive rates on the market.


Magical Installment Loans: We offer installment loans in the amount of $1,500- $20,000 that have a 12-60 month term with an APR 19.99% min - 46.8% max. On $1,500 borrowed for a 1 year term at 3.9% per month, the total cost of borrowing including a $194 fee is $896.00. The total amount to be paid back with interest and fee is $2,396.00. AB License #349796 and BC License #83626

NOTE: Our installment loans are open, so you can pay off your loan at any time with no penalty. You will only pay interest up to the date you pay it off.

Magical Cash Loans - Ontario, British Columbia, Northwest Territories, Nunavut, and Yukon Residents only: We offer Magical Cash Loans in the amount of $100-$1,500.00. The cost of borrowing is $15.00 per $100.00 for each $100.00 borrowed. On a $1,000.00 loan for 14 days, the cost of borrowing is $150.00. The total to payback is $1,150.00 which is an annual percentage rate of 391.07%. ON License #4741412. BC License#85919.

The Loan must be paid in full by the end of term, no extensions or exceptions, no automatic renewals. Failure to pay your debt on time will impact your future credit with Magical Credit Inc. and other credit lenders. All delinquencies will be reported to the Credit Bureaus.

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