What is an unexpected expense?

Conventional wisdom says that the money should be reserved for "incidental expenses" in the emergency fund.

This is true. But what exactly is an unexpected expense?

Here it is:

This is not a recurring annual financial statements

Your property tax bill in the bill for car insurance, the annual premium of life insurance, the study of glasses and other costs once a year are not surprising. Instead, you get to fully pay the bills annually or semi-annually.

Budget, giving them a certain amount each week or month. If your property tax is $ 5200 a year, for example, set aside $ 1,000 per week. If your exam and glasses replacement lens costs $ 300 per year, I have $ 25 per month. These are not the kinds of issues that your emergency fund should be used.

It is not the occasional maintenance or repair

Is leaking from your roof? Your dishwasher breaks down? Need to pay a deductible of $ 1,000 health insurance?

Most people call these unexpected expenses. But some experts disagree personal finances.

"Medical bills, car expenses and costs of the house are not really unexpected - at least it should not be," says Liz Weston, personal finance columnist for MSN Money and author of the 10 commandments of money. "If you have a body, a car or a house, sooner or later, it is going to cost you."

What it means is that the budget should be an estimate of how much you spend on variables such as problems at home, including auto and health costs.

For example: A good rule of thumb is 1 percent of the cost of your home set aside each year for repairs and maintenance are set. If you live in a $ 250,000 home, for example, you need to save $ 2,500 per year or $ 208 per month.

You will not spend $ 2500 per year. Some years will be $ 100 or $ 200 to spend on basic maintenance, such as cleaning the gutters. But other years spent $ 7000 to replace the roof. The golden rule of 1 per cent is destined to a long-term annual average rate, and the budget for such expenses by allocating $ 208 per month on the background of "repair and maintenance" that you have.

Read more: Should I buy or rent a house?

The same is true for automotive and healthcare expense. You can choose to set aside $ 600 per year or $ 50 per month for car repairs. Some years will spend $ 0 Other years, you will have to pay more than $ 4,000 to replace the transmission. Annual budget "smooth" these vibrations.

Similarly, you need to put a little money aside each month to cover deductibles, co-payments, prescriptions and other medical expenses out of pocket. The lifting amount should be aligned with this of-pocket costs and maximum annual deductible on your health plan.

For example, say that your health plan has an annual deductible maximum annual $ 1,200 and $ 5,000 total out of pocket. If you are generally healthy and rarely visit the doctor, you can in a health savings account set aside $ 100 per month or $ 1,200 per year. If you think you need more frequent visits, the doctors could choose aside $ 416 per month or $ 5,000 per year (full year maximum out of pocket).

So what is really unexpected?

Your emergency fund should be for expenses that are not used to fall right as property taxes, optometry and auto insurance in the categories of projects "annually". Should also be used to pay bills that are outside the range of home care and repairs and car and invoices in the normal health effects.

Actual expenditures are hitting the result of unexpected events such as job loss or a large bill from the norm, health insurance is not cover.

Define your concept of "unexpected" bills to these events once-in-a-lifetime instead of the most common activities ,. Then adjust your budget accordingly.