6 Most Expensive Emergencies To Financially Prepare For Before 2024
Written by
John Csiszar
Edited by
Ashleigh Ray
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The American economy was a mixed bag in 2023. While GDP continued to grow in the face of high interest rates and inflation, the housing market remained out of reach for many, and some large companies began layoffs.
The jury is still out for what 2024 will bring, with some saying the Fed has engineered a perfect soft landing while others still fear for an economic recession, with all of its unpleasant side effects. Regardless of how 2024 plays out, it’s always prudent to be financially prepared for emergencies.
While you can hopefully escape the year unscathed, here are some of the most common types of financial emergencies that you’ll want to keep an eye out for.
Recession/Losing Your Job
There may not be a recession in 2024, but some economists and financial analysts are preparing for it.
In response to inflation hitting its highest levels in 40 years, the Fed has aggressively hiked interest rates in an effort to slow the economy. While we’re likely near the end of the rate-hike cycle, historically speaking, these types of Fed actions often result in a recession.
This could be a good time to build a larger-than-usual emergency fund, perhaps to 12 months’ worth of expenses instead of three-to-six, if possible. If you’re on good terms with your boss, you might also consider checking in on the state of your company and whether any layoffs are anticipated.
Another good idea is to bank any year-end bonus you might receive just to have an additional cash buffer in the event of a potential job loss.
Car Repairs/New Car
You can’t predict the need for a car repair with any certainty, but it’s a good idea to assume that over time, some repairs will be needed. The age of your car and the consistency of your maintenance play big roles in terms of how much you might have to spend on repairs, so set your savings goal accordingly.
If, on the other hand, you’re considering buying a new car, make sure you have enough saved to make a sizable down payment. Also, prepare yourself for the fact that in addition to the high price of cars in general, interest rates remain high, so you’ll likely be paying a bigger amount every month than you did with your last car.
Home Repairs
Typically, you should expect to pay at least 1% of your home’s value every year in maintenance expenses. But beyond that, you should also expect to occasionally have a major home repair such as if your home has water damage, needs new paint or becomes infested with termites.
Although inflation has been falling, it topped 8% in the not-too-distant past, meaning the cost of your supplies and/or workforce has likely risen considerably from the last time you had a major repair.
Medical/Dental Expenses
There’s no getting around the fact that medical expenses can be costly in America.
Whether you have a medical emergency or are simply paying for things like medications, screening exams or the occasional office or hospital visit, even with insurance, you’ll likely be out of pocket for at least something. In some cases, this “expected unexpected” cost can be significant.
This is particularly true for dental emergencies, which many people neglect to include when saving for medical emergencies.
Pet Emergencies
Owning a pet can be much more expensive than many people think. In addition to the cost of feeding another mouth, your pet needs much of the same type of care that you do, including regular doctor (vet) visits.
In the event of a major emergency, such as a broken limb or some type of disease, the good news is that pet care technology has advanced significantly, and many pet ailments can now be cured. Unfortunately, the cost of this care usually isn’t cheap. Just like you should have an emergency for your own medical surprises, if you have pets, you should set one up for them as well.
Stock Market Selloff
A stock market selloff isn’t a “financial emergency” per se, but it often precedes or accompanies a recession. In other words, if the economy does contract in 2024, you should anticipate that your stock portfolio will suffer as well.
This isn’t something to fear, however. Rather, it can be an opportunity to increase your investments if prices fall. Over the long run, the stock market has always gone on to set new highs no matter how severe a bear market becomes, so patience and a long-term view — along with consistent savings — are the keys to success.
Just be prepared emotionally for falling values at some point, as market corrections are relatively frequent. On average, selloffs of at least 10% have occurred every 1.2 years since 1980.
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