3 Common Money Traps To Avoid If You Get an Unexpected Bill

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As the saying goes, it’s always best to “expect the unexpected.” This is especially true when it comes to finances. While you may not want to dwell on the possibility of needing an unexpected car repair, a trip to the emergency room or an expensive home renovation, it’s important to create a financial cushion that will allow you to pay for these costs in stride.

Yet, many people don’t have such a cushion. According to a recent TD Bank report, a majority (72%) of Americans have been impacted by unexpected bills. However, 36% of Americans said they are not confident they have enough savings to cover unexpected bills. This can lead you to fall into three all-too-common money traps.

Here’s a look at the money traps many Americans fall into when they get an unexpected bill, plus, how to avoid them.

Going Into Debt

According to the TD Bank report, 59% of Americans who have been impacted by an unexpected bill have gone into debt as a result. However, this can be avoided with the proper preparation.

“The first step to being financially prepared for an unexpected expense is to proactively build an emergency savings fund, which should consist of three to six months of living costs,” said John Bunzel, head of deposit growth and engagement at TD Bank.

“Additionally, creating a monthly budget and sticking to it will ensure you’re setting aside funds in your emergency savings, while identifying any financial habits that could prevent this,” he continued. “Having an emergency savings fund will help you avoid incurring unwanted debt or dipping into retirement savings, which can hinder your ability to reach short- and long-term financial goals.”

Misusing or Depleting Emergency Savings

Among Americans who have been impacted by an unexpected bill, 33% had to reallocate part of their savings to cover costs, the TD Bank report found. This is not necessarily a bad thing, however, as some bills warrant dipping into emergency savings.

“If your emergency savings is fully funded, it is appropriate to pull from it in a responsible way,” Bunzel said. “Many consumers use their emergency funds for larger expenses, such as a car repair or medical bills.”

However, your emergency savings should not be used for bills you can anticipate or control.

“If the bill is expected, you should allocate it into your budget every month to accommodate the costs where possible,” Bunzel said.

Even if you do have a true emergency expense, you should avoid draining your entire emergency savings fund.

“You should avoid depleting your emergency savings entirely so you always have a financial cushion that protects you from an inevitable unexpected expense,” Bunzel said.

If you do deplete your emergency savings, look for ways to build it back up ASAP. One of the best ways to do this is to make savings automatic.

“Allocate part of your paycheck to go directly to savings or set up recurring transfers into savings,” Bunzel said.

Being able to set aside a portion of your paycheck to savings may require some reworking of your budget. Bunzel recommended looking for spending areas where you can cut back.

Another option to rebuild an emergency savings fund is to redirect funds from other nonessential savings accounts.

“Reallocate your savings funds from a vacation fund to replenish to your emergency fund until you have enough set aside for future emergencies,” Bunzel said.

You should also utilize tools that help savings grow faster.

“Consumers can capitalize on savings vehicles that can help accelerate their savings growth, like keeping their emergency savings in a higher-yielding savings accounts,” Bunzel said. “Or, if you know you have at least six months in your emergency savings, considering high-yield CDs for a shorter duration could ensure future savings.”

Becoming Financially Unstable

Nearly one-third (31%) of Americans who were impacted by an unexpected bill said that it caused them to become financially unstable, the report found. This often goes hand-in-hand with having to take on debt.

“Unexpected bills can quickly lead to debt — especially for those living paycheck to paycheck or beyond their means,” Bunzel said. “For example, if you receive a $1,000 medical bill but only have $200 left after covering your monthly expenses, you’re immediately facing $800 in debt, underscoring the need for a separate emergency savings account that can cover the cost.

“Otherwise, the remaining $800 in debt may incur interest immediately, which can compound over time and significantly increase the total amount you owe.”

When faced with an unexpected bill or expense, Bunzel recommended asking the merchant if they offer interest-free payment plans or other repayment options. Once you’re back on stable ground, take steps to ensure any future unexpected bills won’t upend your financial situation.

“It’s important to regularly budget and spend within one’s own means to help prevent an unexpected bill from affecting your financial situation,” Bunzel said. “Prioritize creating an emergency fund and reduce discretionary spending until you are confident with what you have saved.”

Sources

• TD Bank, “One in Three Americans Caught Flat-Footed on Financial Preparedness, TD Bank Report Reveals” (April 23, 2025)

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