How to prepare your budget for unexpected expenses

This article is part of a fictional case study series following "Sarah", a typical first home buyer in Victoria. Read each article to follow "Sarah" through a variety of articles exploring issues related to buying a home.

Sarah's week went from bad to worse. We all know the feeling. Everything is going fine with your money, you’re saving, you’re taking care of bills and making progress. Then, bam – something happens and you’re immediately back starting from square one.

As a secondary school teacher earning $55,000 a year, she was on a tight budget to begin with. And after a few years of scrounging, she had $20,000 put aside for a house deposit. But then disaster struck:

  • She got in a car accident and had to replace her car. She wanted something reliable, so spent $8,000 on a used car.
  • The next month, her laptop stopped working. It couldn’t be repaired, so she needed to buy another one for $700.
  • Then the month after that, she discovered the worst outcome of all – she needed a root canal. And because she didn’t have private health insurance, it ended up costing her $2,000 for both the root canal, and the crown on her tooth.

That’s more than half her deposit gone, right there. It seems like these types of expenses simply can’t be budgeted for.

But maybe they can. You can always do some things to reduce the impact of unforeseen expenses:

  • Keep an account open with a few months’ expenses in there. Don’t touch it for any reason – only for emergencies.
  • At the start of the year, look at your calendar and make a list of all the bills you know are coming.
  • Look at the calendar again, then think about some big expenses. Will you need to buy a car this year? What about repairs – has anything gone wrong lately? Think about that beforehand then start putting some money away. You may not have it all saved, but it’s definitely better than nothing.

Remember, unexpected expenses are part of owning a house – even if you have insurance, so it’s always good to budget for them. Leaks, building damage and so on require excess payments. Sometimes they’ll cost more if they aren’t covered by insurance.

That’s why it’s always good to have at least a few months’ expenses put in a savings account that you forget about. Then whenever something happens, just top it up again. It’ll give you peace of mind as well that should anything happen, at least it’ll be annoyance – rather than a complete disaster.


It might seem a little overwhelming to look at everything Sarah needs to pay, but once she does it, it isn't bad at all. Now she knows what to prepare for.

Home First
Home First