For everyone starting out on their budgeting journey, we recommend trying the 50/30/20 method. Its simplicity is that it divides your entire life into three easy to manage categories. Additionally, because it is done by percentage of your salary instead of pound value, it’s as flexible as you need it to be on a monthly basis. By setting up a custom saving step that saves 20% of your income each month as it comes in you can save without even thinking about it.
However, if you are like the other 4.8 million Brits (that's 15.1% of the workforce by the way) who are currently self-employed, you may struggle to apportion 20% of your monthly income to your savings. If don’t feel like you can save a regular amount of money each month then worry not, there are other ways to arrange your savings and to put aside money.
1. Take time to make yourself a comprehensive budget
You have to have a few base numbers that you work from every month. This means your rent, your bills, your insurance, and any other costs that have to come out regardless of your income. These costs totalled up become your baseline figure - the amount you know you need to pay out.
Once you have this you will know exactly how much of your income is "excess" and can be channelled toward food, fun, and saving and investments.
2. Change the time frame in which you save
Maybe it doesn’t serve you well to think about saving on a monthly basis. Either you are paid weekly or bi-weekly, or you have outgoings that come out at irregular intervals that can’t be squared away to monthly cycles. If this is the case then change your saving time frame from monthly to weekly.
You can set automated saving steps with Oval that put aside a set amount of money each week into your digital wallet. Alternatively, if you need to change the amount of money you save each week due to cash flow, then there are other customisable steps you can set up - such as the new fitness step. It allows you to save when you exercise, meaning that your savings are directly tied to how many kms you cover. This puts you in full control of exactly how much you save each week.
You can even choose to just round up the pennies each time you make a purchase. Small, manageable amounts that mean you are making savings without pushing yourself into financial difficulty.
3. Invest a percentage of your savings
If you can't commit to saving and investing a regular amount each month, then by investing through Oval you can easily automate your investment by investing a percentage of what you save each week.
This means you will never be tied to investing a set amount, and instead will only invest a portion of what you have already saved. By doing this it means you will not have to choose between whether you will save or invest each month. Instead, you will ensure that you can always do both.
4. Take care of your essentials first then save and invest the rest
Whilst it’s usually recommended to schedule your savings to come out the same day as your paycheque – for those on irregular incomes this can be impractical.
Always take care of you essentials first. This means your food, your shelter, your bills and your transport. Then divide what is left into your saving and investment accounts. By doing this you will be able to put more away on months when your income is bigger, but won’t put pressure on yourself on the months where you earn less.
Your capital is at risk, and past performance may not be a reliable indicator of future results. Oval Money is not permitted to provide financial advice, and if you have any questions please consult an expert.