For everyone starting out on their budgeting journey, we recommend trying the 50/30/20 method. Its simplicity is its greatest strength. It divides your entire life into three easy to manage categories. 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) 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 Make a custom designed budget
Start by calculating your compulsory overheads. This means your rent, your bills, your insurance, and any other costs that have to come out regardless of your income. These costs combined up become your baseline figure - the amount you know you need to cover each month.
Once you have this you will know exactly how much of your income is "excess" and can be channeled towards fun, savings, and investments.
#2 Choose your savings time frame
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 what suits you best.
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
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.