Financial game-changers: Budgeting for the unexpected

Life can upend even the most carefully crafted financial plans. A surprise pregnancy or unexpected job loss, for instance, could mean putting retirement goals on hold to account for changing circumstance and priorities.

When you get thrown a curve ball, here are a few things to keep in mind to keep your retirement plan on track:

Expect the unexpected

Most financial experts recommend keeping an emergency fund that covers three to six months of expenses. Make that a full year's worth of expenses if you are self-employed or your income is prone to fluctuate.

Concerned because you don't have an emergency fund? You aren't alone: 69 percent Americans have less than $1,000 saved for a rainy day, according to a GoBankingRates survey. That's a risky place to be -- one wrong move and you could be backed into a corner with nowhere to go but a high-interest personal loan or credit card. Make a plan: There are many savings accounts with low minimum balance requirements that can help you start socking away some cash. Although the yield on many of these accounts may be low, over time that money adds up as interest is earned.

"We can all get through a major event, and we can thank the credit card industry for that," financial adviser Devon Klumb told CBS MoneyWatch. "But many people do not do a good job of paying the card right away -- and if you tack 17 to 25 percent interest on a credit card [balance], people get into trouble."  

Baby on the way

Having a baby is a huge physical, emotional -- and financial -- event. The first year of a child's life, including daycare, can cost a middle-class family up to $21,000.   

What can you do to minimize those costs while making the right long-term decisions for your growing family?

Do as much as you can to prepare ahead of time. Within a general timeframe of nine months, you have time to research changes to health insurance and daycare costs; also do the math on the price of daily essentials, and reach out to your support network.

There are lots of ways to cut costs. Julia Wang, digital content head at the maternity website The Bump, said people tend to overspend on items such as clothing, toys and fancy crib bedding -- much of which will be used for a very short period of time, if at all.

"Clothes have such a low return on investment -- babies grow so quickly, you'll never recoup the cost of the clothing. If you can get a hand-me-down, take advantage of it," she said.

Instead, purchase big-ticket items ahead of time and stock up on essentials like diapers or wipes. Start paying attention to costs of diapers and formula -- buy them now, before the baby comes, and have family and friends be on the lookout for bargains.

Another important thing to consider: maternity and paternity leave, and childcare. See if you qualify for the Family Medical Leave Act and make sure you understand your employer's maternity and paternity leave policies. Depending on your state of residence, you may have more generous leave policies, in addition to support like nursing coaches or other assistance once your child is born. 

Who will care for your child on a daily basis, and what that will do to your budget? More than a third of U.S. families spend 20 percent or more of their annual income on childcare, according to a Care.com parent survey. Deciding whether outside care is right for you means carefully considering your options.  

"Some people decide that mom (or dad) is done working," financial adviser Matthew Seppanen said. "It's shocking how easy it is to prioritize spending when you are bringing someone into the world. Everything goes out the window." 

Especially for the first year, when a new budget is being implemented, it's okay to take a breather from retirement contributions -- as long as you factor in the changes and begin contributing again as soon as possible.

Out of a job

In the event of a sudden job loss, the most important thing to do is prioritize necessary spending. Focus on keeping the lights on, paying rent, paying your health insurance bills and getting your next job. Make sure you account for any severance your ex-employer might owe you and file for unemployment benefits if you are eligible.

It's OK if your retirement contributions are put on hold during this time period. Most experts say you should even wait to decide what to do with any existing retirement funds until you move to your next job. 

"It's such a traumatic event," financial adviser Sanjay Jain said. "Once you settle in your next job, then you can take care of it."

While you may be tempted to immediately roll over any existing retirement funds into an IRA plan, many experts suggest waiting until you know where you will land. If you have a 401(k) at your former employer, your next company may use the same provider, allowing you to easily move that money over to the new plan. Immediately transferring the money to an IRA when you lose a job means you won't be able to consolidate your savings, if it's allowed at your new job.

Keeping your health insurance while unemployed is another essential. If you lose your employer-sponsored coverage, you may qualify to continue benefits with COBRA, including in cases of voluntary or involuntary job loss, a drop in work hours, and other life events. This will generally allow you to keep your current health insurance for up to a year, though you will need to pay the full premium each month. Although the monthly costs of carrying COBRA can be high, the financial risks of being uninsured are arguably higher

"You don't want to go through a catastrophic event while you are unemployed," Jain said. 

There is a 60-day period after you lose employer sponsored health care coverage to enroll in COBRA, which you can use to determine whether this is the best coverage option. 

You could also buy an individual insurance plan under the Affordable Care Act. A job loss is a qualifying event, allowing you to purchase a policy at any time, and if your income drops you could qualify for a subsidy. (President Trump has made it his goal to repeal the law, but until then it is in effect.) If your income drops significantly, you might even be eligible for Medicaid

Don't panic

Most important, don't panic. Examine your budget: Where can you cut back on spending? Is there a way to add income, even if it's a short-term "side hustle"? Although your financial goals may take longer to reach, often there are ways to supplement savings and rebuild your finances.

"Overall, it is best to run several scenarios and see if it is possible to 'give a little' from several corners of your financial life – a little from the monthly budget, a slightly cheaper vacation this year, a little less in education savings, a slightly reduced contribution to retirement account, etc,"  financial adviser David Metzger told CBS MoneyWatch. "It definitely doesn't have to be an all-or-nothing proposition. Then when the reality of the new life event has settled in, we can begin making adjustment back in the direction from which we came."