Why money trouble comes in threes

By MP Dunleavey

Editor's note: Join columnist MP Dunleavey and a group of women as they seek to strip away the myths around money, liberate themselves from debt and find financial sanity. Follow the quest of the Women in Red every other Wednesday in Dunleavey's column on MSN Money.

The water heater can't just die by itself. It needs company.

So, in what seems like a bizarre run of bad luck, your camera and the brakes go bust that week, too.

Or you buy plane tickets to your best friend's destination wedding -- the same week you get an unexpected IRS bill and the vet's verdict that Fido needs surgery.

Why does financial trouble always seem to arrive in clusters? It's not Murphy's Law of Money (although I used to be fond of that explanation myself).

• Tell us: What unexpected events have slammed your budget?

The truth: If you're not prepared to cover that first crisis, whatever happens next -- whether you need to pony up for a $250 water heater or a $25 parking ticket -- will feel like more bad money news than you can handle.

Here's how to prevent a flaming pileup of money problems:

Oops, you forgot to save

First, let me say that the money-cluster problem is almost universal. I checked.

And though it may appear as if cruel fate was behind the simultaneous water heater/camera/brakes fiasco, the real factor here is cash, says Boston financial adviser Jonathan Pond, the author of "Grow Your Money."

If you're like most Americans, you probably don't have a substantial cash buffer for emergencies. In 2005, the national savings rate plunged to its lowest level since the Great Depression, according to the Bureau of Economic Analysis. By some measures it's still hovering around zero.

Having a cushion to meet unexpected expenses is key because of the financial domino effect. Let's say you are hit with a surprise $1,471 car repair bill, as my husband and I were last summer. "If you get hit with a $500 bill soon afterward, it's a disaster," Pond says.

Amanda Clayman, a therapist in New York who specializes in financial matters, says the downward spiral can happen quickly if an unexpected expense causes you to overdraw your checking account or tap out your credit cards.

"Then you're missing payments, you may incur late fees -- this can drive up your interest rates," Clayman says. "If you're living on the financial edge, then any problem has a way of creating other problems."

Oops, you weren't paying attention

In addition to being financially unprepared, you can brew trouble for yourself if you tend to keep blinders on when problems are looming.

Pond points out that the more moving parts your life has -- kids, cars, work and family obligations, maybe a second home or rental property -- the more types of unpredictable expenses you'll face. And the more chances there are that you'll ignore a pending problem and end up paying more when the whole thing goes kablooie.

"It's the old, 'How long can we live with that noise in the car?' That's how little items become big items," says Pond, who has three daughters and a household with four cars, and has experienced the unfortunate overlap of transmission troubles, roof repairs and tuition bills.

Put No. 1 and No. 2 together, and here's what happens: You avoid making that car repair or seeing a dentist about that throbbing pain because you lack the cash to begin with. Then, by postponing the inevitable, you inevitably end up dealing with a series of financial crises that could have been prevented.

Oops, you forgot to predict the unpredictable

It may sound like an oxymoron, but Pond says another big problem that contributes to serial money troubles is failing to factor in the cost of the unpredictable elements in life.

These are the budget outliers, so they are easy to ignore, but avoid them at your peril. Just because certain items don't fit the monthly budget mold doesn't mean Santa Claus brings the money.

Continued: Your budget strategy

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