Budget busters: You won’t know what hit you

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Worrying about money may be near, if not so dear, to our hearts but no matter how careful we are, there are always surprises. You can’t think of everything, but we all want to do what we can to avoid the black swans—the strange anomalies that we never see coming. Watch enough Star Trek and you’ll learn pretty quickly that even anomalies occur episodically. I mean, when will they figure out the shields won’t work, there’s an alien in the computer system, and someone has a worm in the brain? Every week. So here’s a list of budget “surprises” that are pretty predictable once you think about them:

College

If your child goes to a college that’s far enough away from home base that flying is in their future, you’re going to be shocked at how much airfare Junior is going to rack up. Think you’ll send your kid off in September and see him at Christmas? Think again. For a lot of places, there’s mid term break in October, Thanksgiving (the kid who never wanted to see the relatives is suddenly burning for your old traditional celebration); Christmas (often for a month); spring break; and back home again earlier in May than you imagined. With all those weeks off, it’s amazing how they can eat enough to justify those room and board charges, no? That totes up to 5 round-trips a year. Plan on visiting lil’ Amber on campus? Wait to you check out the costs of those cute little bed-and-breakfasts in college towns. Add $2-3,000 for flights home and one trip to campus for mom and/or dad.

Home renovation

If you’ve ever been through this, skip to the next section. I don’t want to cause you any more pain. But for anyone thinking that maybe they’ll re-do the bathroom (especially after they retire), take whatever you think would be the reasonable cost and double it. No exceptions. If you’ve already taken bids you’re already in shock, but take the highest one and add at least 25%. I’m on my third house renovation and let me assure you I’m being conservative.

Also, if you work at a job that depends on your own efforts (not salaried), take your income down at least 10% for the period of the renovation. Chasing contractors around will become your part time job, guaranteed.

Income tax

If you’ve been doing your own taxes, you are going to be very surprised by what CPAs charge. If your taxes are simple enough that you can do them yourself, CPAs are cheap. But if you actually need help for some slightly more complex matter, surprise! In retirement, your taxes can get a lot more complicated than they ever were when you were working. $1,200 to a CPA once a year is $100 per month more that you need in your retirement budget.

Retirement

Inflation may be the worst enemy here—not regular consumer price index inflation, but sectors that inflate much faster—like nursing home costs, property taxes, or supplementary health insurance costs. Your personal inflation rate may be quite different than the CPI.

Also, poor health or health crises (like a knee or hip replacement) can have a lot of “support” costs. For example, you may need someone to do more yard upkeep, have groceries delivered or meals prepared, manage bills or finances, or help you get to and fro. If you don’t already use these services, you will. If you already do, you’re probably going to need more. Finding assistance, even when you’re able to pay, can be time consuming and even expensive (if you need to secure a “care manager”).

One of the most common things any realtor can report is that as we age, we may be less able to keep up with updating and maintaining our homes. This deterioration of one of our biggest assets can really eat into equity. Think through whether it’s really so noble to hang on to that house until someone wheels you out, and what it’s costing you in wasting assets as well as out of pocket.

Long term care

If you haven’t looked into assisted living/homecare/nursing home care you are going to have a heart attack when you find out the price. Really, just call your local facility and check out the price for sharing a room that’s way smaller than Motel 6. Think you’ll stay home instead with some nice lady helping you? Try 3 nice ladies for ‘round the clock care, plus more for weekends, plus a backup emergency service for when your first string gets sick or has their own family emergency (at twice the price). Okay, I’m Dani Downer today but making like an ostrich doesn’t help.

But even at coronary-inducing prices of $7-8,000 a month in a facility, you’re not done yet. Those charges don’t reflect the costs for any non-Medicare incidentals you might need—mouthwash, aspirin, Depends—all charged at premium prices. In my experience, it’s very easy to incur extra monthly charges that will easily eat up an extra $1-2,000 PER MONTH.

Do you have a parent that might need your help? This can be not only a financial dent, but a tremendous consumer of time. The responsible adult child is going to take a big hit to his or her work life. If you have an elderly parent, better hoard that comp time now.

General daily living

Do you have a budget item for computer emergency repair? Thought not. Ever had a computer emergency? Thought so. Even if you have a 15 year old on-call, they’re probably trying to earn money for college and it’s amazing how much it costs to ferret out what’s wrong. I admit that it’s getting a little better now that our friends in India can take over our screens, but one good computer meltdown can cost you a lot. Last summer I operated for two weeks from my daughter’s computer, my phone, and my iPod touch while I waited 10 days for Dell to deliver (I’m too cheap to pay for overnight service), and another two weeks ironing out which software would still work, and which had to be upgraded. The software turned out to be the really expensive part—kinda like razors and razor blades. Putting in place a backup system ain’t cheap, either. And really, you don’t want to live with a teenager who can’t access her chats at a moment’s notice. Plan to replace your computer and your software every three years. And if you don’t have to, well, you’ve just gotten a get out of jail free card.

I’m sure there are many other blindsiders that I haven’t seen coming just yet, and I’d like to hear about them. But in the meantime, you can see why I recommend that everyone have a very substantial emergency fund. And that’s not called “credit cards”. These are the kind of things that can dig through prosperity and produce a financial avalanche. But one thing we can know for sure: plan for the certainty that unexpected financial emergencies will happen. And double check your force field.