When seeking to live by a budget, it is vitally important that you divide your funds across each section of your budget accurately. Somewhat surprisingly, this can be a little tougher than you might initially expect – which, if some areas have been under- or over-provided for, can derail the entire budget. We recently had a car since my partner passed his driving test and you have to make sure the car is covered and taken car of.One area that tends to suffer most from the above issue is car-related expenses. Some car-related expenses are the same every month and are paid on a single date, whereas others are more variable, with the costs sustained throughout the month. This means that tracking every car expense is difficult; it’s not a simple case of collecting together receipts (as with grocery spending, for example) or checking a direct debit amount (as it is for most regular bills). Instead, you’ll need to break your car budget down into different sections, as we have outlined below…
#1 – Insurance
One of the least variable car-related expenses, as you should largely be paying roughly the same amount each month, but also one of the most important. It’s worth noting that whatever brand of car you own, you should be able to cut your insurance expenses by buying an annual policy in full, and then saving towards each renewal each month.
#2 – Finance payments
One of the most popular ways to buy a car these days is through finance arrangements, as these allow you to spread the cost of the purchase over a number of years. So whether you are paying monthly for a BMW or an Audi car finance plan, you’ll need to make sure that the monthly payment is noted down accurately and included in your budget.
#3 – Fuel
The first two points are set figures that can be planned in advance, but the amount you need to allocate for fuel will fluctuate each month depending on your uses and petrol prices at the time. To get an idea of how much you should set aside, look at your previous fuel expenditure over the past three months and then take the average figure, then add 5% extra just to account for any changes – such as a fuel duty rise – that are out of your control.
#4 – Repairs
Car repairs are usually seen as sudden, unexpected costs, but the best way to cope with a sudden need for repair is to set aside a certain amount each month for this purpose. If you don’t need to use your car repair fund in that month, then the amount simply rolls over and is added to the next month – and so on. This way of managing the cost of repairs helps to protect against the need to finance an expensive repair unexpectedly, so is well worth doing.
#5 – Miscellaneous costs
Finally, it’s a good idea to include a small amount in your budget for miscellaneous car costs – such as the cost of de-icer, car washes, air fresheners, car parking fees, and so on. Also if you have children you will need car seats, sun shields and things to keep them entertained like an iPad holder. The amount you set aside from your income each month for this section of your budget does not need to be large, but it’s definitely advantageous to have.