Current account for motoring

cantdecide

Firstly, I know that to most people I will probably appear to be over worried but bear in mind that it's an ambition of mine to go for a mortgage within the next five years or so. Therefore, I want to lay the foundations now so that my financial life in terms of accounting will appear totally self explanatory and squeaky clean as well as giving me a chance of successfully avoiding financial uncertainty from month to month.

I have a permanent, full time job but I don't earn a lot at the moment (min. wage practically). I need my car but the shock of the annual insurance bill as well as the regular petrol, tax, insurance, maintenance and risk of unexpected expenses means that it's very difficult to budget properly. I also have several thousand euro to produce annually for part time course fees as well as general living expenses and you can see how the thought of a €500 unexpected repair bill would keep me up at night.

I know on average, my car costs me €80/ week allowing for all possible expenses including €500/yr for unexpected repairs. I want to take a 'float' of €500 and create a current account for my motoring expenses only and tip €350/ mth into it to theoretically cover most or all of the cost spikes as they occur.

I feel that this would give me a good chance of creating financial stability while and giving clarity to my finances and avoiding some charges. I think it would harm a mortgage application too if my bank records show constant transfers to and from savings accounts even for legit motoring expenses. I think that I need money to go only one way when it comes to my savings account.

Good idea? bad idea?

As a sub question, from a mortgage point of view, am I better off saving with a bank or credit union?

cantdecide

Genius or insanity to dedicate a whole account just for d'car? No strong opinions oh learned ones??

on_my_oe

Honestly sit down, list all of your expenses weekly, monthly and annually, total it up, add 10% for contingency/emergency, then split it out weekly. Set up a separate account, and transfer the amount weekly, and all expenses come out of there, regardless of whether it's a DD for your mobile, your weekly petrol tank top up, your gym membership or your annual insurance. If you are careful, and you regularly get re-quotes on your bills so you keep costs to a minimum, there should be enough for a cheap holiday at the end of year two while leaving 10% emergency funds still in tact.

Use your current account for general spending (and if you like the odd gamble, don't use your debit card or PayPal!).

Put your mortgage deposit savings elsewhere where there isn't much access eg credit union.

That's how we did it.

P. Breathnach

cantdecide wrote: »

Genius or insanity to dedicate a whole account just for d'car? No strong opinions oh learned ones??

You could make a similar case for an account for your energy costs or your telephone costs or your holiday money, and so on.

What I think you should do is learn the basics of budgeting. One approach is to make up a fairly simple spreadsheet showing your expected income on a monthly basis, and your expected expenditure in various categories like rent, groceries, motor, energy bills, telephony/internet, clothing, recreation, etc. Of course you will recognise that not all months are the same, such as when you tax your car, or the winter months when heating costs you more, and so on.

From that you will see where you stand, and what buffer you have for extra costs like a repair job on the car or the cost of going to a friend's wedding or whatever else might arise. And, it is to be hoped, you will get an idea of your savings capacity.

If you create the spreadsheet, you should find that planning and decision-making becomes easier.

mgadget

You need a budget. I use YNAB www.ynab.com. You don't need the software, it is very good though. What you need immediately is to use some of your savings to create an Emergency Fund, €500 to €1000 in size, in an accessible Demand account, if it has a good rate of savings interest then that is a bonus. in the short term this covers you for unexpected things like a big repair to your car, so you can sleep at night.
You should be budgeting for routine maintenance, putting aside money each month for servicing costs, equally for insurance and college. The key to YNAB is to build a savings buffer equal to your income in the last month and use that buffer to fulfill all your expenses in the current month. You are then less focused on the balance of your bank account, instead your focus is on the balances of the budget categories you've created. One of which will be a category called mortgage, where you will have a standing order setup to move a fixed amount each month from your current account to a high interest regular savings account - be realistic in what you can actually afford to give here. The 'mortgage' category and emergency fund are the only accounts I'd have that are independent. Personally, I send to a regular savings account an amount that covers the big expenses, like college fees, insurance, tax, holidays and a seperately account for the mortgage'.

As to your second question, you should be saving your money in an an institution offering you the best return of interest.

cantdecide wrote: »

Firstly, I know that to most people I will probably appear to be over worried but bear in mind that it's an ambition of mine to go for a mortgage within the next five years or so. Therefore, I want to lay the foundations now so that my financial life in terms of accounting will appear totally self explanatory and squeaky clean as well as giving me a chance of successfully avoiding financial uncertainty from month to month.

I have a permanent, full time job but I don't earn a lot at the moment (min. wage practically). I need my car but the shock of the annual insurance bill as well as the regular petrol, tax, insurance, maintenance and risk of unexpected expenses means that it's very difficult to budget properly. I also have several thousand euro to produce annually for part time course fees as well as general living expenses and you can see how the thought of a €500 unexpected repair bill would keep me up at night.

I know on average, my car costs me €80/ week allowing for all possible expenses including €500/yr for unexpected repairs. I want to take a 'float' of €500 and create a current account for my motoring expenses only and tip €350/ mth into it to theoretically cover most or all of the cost spikes as they occur.

I feel that this would give me a good chance of creating financial stability while and giving clarity to my finances and avoiding some charges. I think it would harm a mortgage application too if my bank records show constant transfers to and from savings accounts even for legit motoring expenses. I think that I need money to go only one way when it comes to my savings account.

Good idea? bad idea?

As a sub question, from a mortgage point of view, am I better off saving with a bank or credit union?