Large Expense

Large expense summary:

• A large expense might be a home remodel or an unexpected medical bill.

• In good times, large expense strategies include saving in advance and borrowing.

• In bad times, large expense strategies include dipping into savings and cutting spending. 

Large Expense Definition and Meaning

A large expense is a cost above and beyond what 's in your typical budget, like a medical bill or a home remodel. Many people use loans to cover large expenses. In good times, you might borrow to cover necessary large expenses, like a working refrigerator. In bad times, your strategy might be to cut spending in other areas to budget for the expense.

In most cases, we don’t recommend borrowing for nonessential large expenses like weddings or vacations.

Types of Large Expense

Appliances, electronics, smart home upgrades, home remodels, and medical bills are common types of large expenses so pricey that they deserve their own budget category. 

Appliances include household things you can’t go without, like a stove, refrigerator, or washing machine. Consumer Reports suggest that a new energy efficient fridge might cost between $1,000 and $3,000.

Electronics include a laptop for work or a television for home. A decent laptop for professional use ranges from $800 to $2,000, according to CNET reviews.

Smart home upgrades include smart thermostats, security systems, or lighting systems to improve home efficiency or safety. According to Angi.com, the average homeowner spends $900 on the typical smart house upgrade.

Home remodels include bedroom and kitchen remodels. The typical kitchen remodel costs $14,591 to $41,533, according to HomeAdvisor estimates.

Medical bills can be large and unexpected. GoodRX estimates the average emergency room visit costs $2,400 to $2,600 without insurance, and 2023 data show that an uninsured person might pay $40,000 for surgery to eliminate knee or hip pain.

Comprehensive Breakdown of Large Expenses

How to handle a large expense depends on whether you’re funding it in good or bad times.

Large expenses strategies during good times

In good times, large expenses don’t break the bank. Here are budgeting strategies for  large expenses when rates are good, you have money to set aside, or your income is strong.

Large expenses during bad times

In bad times, large expenses might actually break the bank. Here are strategies for budgeting large expenses when rates are bad and you get slapped with an unexpected medical bill or home repair.

How to handle unaffordable loans for large expenses

Negotiation, consolidation, debt management plans, and settlement could reduce unaffordable loan payments. 

Negotiation is the process of bargaining with your creditor, like your credit card company. If you convince your lender that you can’t afford your payments, it may agree to reduce your monthly payments by extending your loan repayment or shrinking your interest rate.

Debt consolidation means taking out a new loan to pay off multiple accounts. The new loan will generally have a lower interest rate. Debt consolidation simplifies your payments and offers more favorable terms. 

Debt management plans (DMPs) are administered through a credit counseling program. You enroll your unsecured debts and cover them with a single monthly payment. Your counselor may be able to negotiate interest rate or payment reductions to make the debt more affordable.

Debt settlement programs involve convincing creditors to accept less than the full amount you owe as payment in full. You could do this by negotiating with creditors directly or through a debt settlement program. There are downsides, but settlement could significantly reduce what you pay.