Macroeconomic and household finance research often carefully accounts for income shocks but completely neglects expense shocks. We use a survey linked to credit bureau records to estimate expense shocks’ frequency, size, and financial implications. Expense shocks are more common and larger than income shocks. Very large expense shocks are several times more common than very large income drops. Researchers can use our results and publicly available data to account for expense shocks. When we do so in an otherwise standard model, we find: (1) many costly decisions to increase liquidity such as asset liquidations or loan defaults are driven not by strategic considerations but by expense shocks, (2) smoother consumption implies less insurance, not more, (3) expense shocks explain most precautionary wealth, and (4) expense shocks mostly determine the marginal propensity to consume. Hence, expense shocks matter, and they matter more than income shocks in many important contexts.