Accounts

klfairy

I'm trying to get all our household accounts in order. I've done a budget and am reasonably on top of things. I want to set money aside for house maintenance/annual expenses (car insurance, AA etc). I was thinking of setting up another account. Is that what people do? I can't leave money unspent in the main account, so it makes sense to put it elsewhere. I guess I just need some reassurance that I'm doing the right thing.

Currently between us we have:

1) My current account. At the moment all my salary goes in and all the bills go out.
2) My ISA. I pay in £80 a month and either save it for expenses as above, or use it to bail us out when things go awry.
3) OH's current account. Newly opened and nothing in/out. Once he gets a new job and is paid monthly by BACS, he'll get paid into this account.
4) Joint Current account. We use it for shopping/petrol and petty cash. The intention is to make this the main billing account that we will both transfer money into.
5) Another ISA in my name. Intended to be our wedding fund, which we'll start paying into in the new year.
6) A savings account in my name, opened by mistake. Nothing in it.

I was thinking of using number 6 as the household expenses account and paying into that throughout the year. Hopefully we can then pay the car insurance and other things that crop up during the year from it. Should reduce the occasions that things go wrong in the year (fingers crossed).

Now the other thing, is that I have an overdraft which I posted about in the debt-free wannabe section. I'm considering opening a new current account in my name to transfer my wages into from my original account, bar say £50 a month to chip away at the overdraft.

Am I making things unnecessarily complicated? Please advise

nikki1520

you should probably pay the overdraft off first as this is costing you money (unless it's a totally free post graduate one)
Then, you should probably put your savings in the ISA (assuming it's a cash ISA) - you'll probably get a little more interest, and it won't be taxed.Unless it has a limit on the number of withdrawals.

I noted you said you had two ISA's - you can only pay into one in any tax year

Keep it as simple as you can - if it gets all complicated with moving money around, it's easy to miss something.
Good luck

klfairy

The overdraft is charged at £1 a day rather than at an interest rate. I feel this creates little incentive to pay it off, because it costs me the same to be £10 overdrawn as the full £2k. I have had the overdraft for about 6 or 7 years. I get paid and up to 0 or thereabouts, then by the end of the month I'm at the bottom of it again. I don't know how to break the cycle.

I didn't realise that about the ISA. I knew there was a money limit, but as I won't hit it I didn't think it mattered how many accounts were used. I'll get OH to open one for our wedding fund.

Fiddlestick

klfairy wrote: »

The overdraft is charged at £1 a day rather than at an interest rate. I feel this creates little incentive to pay it off, because it costs me the same to be £10 overdrawn as the full £2k. I have had the overdraft for about 6 or 7 years. I get paid and up to 0 or thereabouts, then by the end of the month I'm at the bottom of it again. I don't know how to break the cycle..

Spend less.

It sounds a bit glib, but that really is how to 'break the cycle'. If you need some help cutting back you should pop over to the DFW board and post an SOA - you will get lots of great suggestions.

klfairy

Fiddlestick wrote: »

Spend less.

It sounds a bit glib, but that really is how to 'break the cycle'. If you need some help cutting back you should pop over to the DFW board and post an SOA - you will get lots of great suggestions.

I know what you're trying to say, but I could do with some practical suggestions on juggling the money, rather than stating the obvious!

jennifernil

I would be looking at how much the OD is costing you, the" £1 a day" can soon add up.

Are you getting more interest on your savings than what all those £1s add up to?

If not, you should use some savings to clear that OD.

Keep the OD in reserve for when you REALLY need it.

For accounts....

1 current each and a joint for bills sounds good. Make a budget and stick to it then you won't get nasty surprises.

An ISA each for longer term savings is also good. (you need to deal with that second ISA business right away)

An instant access savings account for emergency funds is good too. Decide on how much you need to keep in there and top it up as required, put everything else into the ISAs.

Make sure all these savings accounts are ones that give the best possible interest.

klfairy

I have 92p in one ISA and £10 in the other. Do I need to officially close one or can I just leave one empty and do nothing with it?

tagq2

klfairy wrote: »

I have 92p in one ISA and £10 in the other. Do I need to officially close one or can I just leave one empty and do nothing with it?

You can have as many ISAs as you want but you can only subscribe to one ISA per tax year. To subscribe is to deposit money other than from an ISA transfer (which is how you should always transfer money between ISAs so as not to lose tax-free status). To be clear, ISA transfers and interest, dividend etc. accrual do not count as subscription or toward the limit.

But you can also transfer your whole current tax year's subscription if your provider lets you and then continue to deposit only into the account you have transferred to.

If you have put money in to more than one ISA this tax year (other than from an ISA transfer) then you may want to contact HMRC before they contact you. You won't get into any trouble though you may end up with deposits into the second account you have subscribed to being reversed.

jennifernil

Do you have any other savings? Previous years ISAs....anything?

If not then you do seriously need to reduce spending! (sorry)

If you open a new current account and more or less stop using the present account, the bank could well call in the overdraft, or at least substantially reduce it, so do be careful there.

klfairy

No, no other savings. We're living within our means month by month, but not doing anything with the overdraft. Initially it was there to help me when I finished my teacher training in the July and started my job in the September, but that was in 2005 *blush*. If it was just me I'm sure I'd have paid it off by now, but now there are two of us and we've had some ups and downs financially, plus a baby (toddler now).

My own debts are about £3.8k, but my OH has more like £6.5k. I suppose they're not too horrendous really (and we're not getting charged massive interest rates) but I don't want it to get any higher. I want to start chipping away at it.

I did try to phone the bank earlier and discuss my overdraft, but after 5 minutes of waiting for someone to answer I gave up.

jennifernil

I see. Personally, I would concentrate on the debts first, make a really big effort.

I'm sure you will get plenty of advice over on the DFW board.