Savings are vital for people who work for themselves. For many self-employed people, cash flow can be erratic, and you don’t get the same job security as those with full-time employment. Painless life hacks are one way to help get your finances in shape. Being able to put something aside is the first step to being in control of your money. Unless you’re paying off expensive debt such as credit cards — in which case that should be your first priority.
Research shows that 16 million people in the UK have less than £100 stashed away in savings. That’s according to recent research by the Money Advice Service, which is a government-backed organisation that aims to help people make good financial decisions.
The same study asked people with low savings what kind of help or advice they would find the most useful. The most popular answer, selected by 55% of people, was:
“Show me how I can save without impacting on my lifestyle”
This seems like a fair request. So without further ado, here are our top five life hacks for saving money without compromising on the way you live your life.
1. Make the most of compound returns
Compound returns are often referred to as the eighth wonder of the world.
The concept is simple. In the first year of investing you generate returns on your initial investment. In the second year you invest the capital plus the returns, and you generate further returns on the total. And so it goes on, and your money snowballs into a pot that you can eventually retire on.
But most people underestimate the power of compounding. In 2011, a study at the University of California showed that when asked to answer the following question:
If you saved $400 each month at 10% yearly rate of interest, how much would you have in 40 years?
The average respondent answered $500,000. But most forgot to calculate the compound interest: the correct answer is around $2.5M.
To benefit from compounding, remember that time is your friend: the longer the time period over which your investment returns compound, the higher your pot in the end. So start saving or investing early, and you’ll be well rewarded. Nutmeg have partnered with Xero to offer a saving service that is user friendly for those who are self-employed.
2. Get ‘appy
Artificial intelligence is transforming the way we manage our money. Cleo and Chip are just two of the brand new digital tools to help you save money.
Cleo is an ‘intelligent assistant for your money’ and is essentially a text and Facebook Messenger service. You just enter your phone number and bank details, and Cleo sends you regular updates on your spending – how much, on what and when.
Chip is a smartphone app which also connects to your current account and analyses your spending habits. Chip also transfers money automatically into a savings account for you, based on how much you’re spending. This makes saving money as effortless as spending it. It never transfers more than you can afford, and the ‘little and often’ nature of the savings means your pot fills up without affecting your everyday spending.
3. Vouch for this
You should never pay full price for a meal out at a chain restaurant, a night’s sleep at a chain hotel or a big purchase from a high street retailer. Visit vouchercodes.co.uk and lose yourself in the joy of browsing a whole new world of deals. It’s a good idea to bookmark the page and get into the habit of checking it before you buy anything.
4. Go incognito
Become a mystery shopper and get paid for eating out, buying a round in the pub or picking up essentials from high street shops. You can sign up for free here and take on the assignments you fancy. There’s no minimum commitment and you can choose from assignments at pubs, restaurants and shops near where you live. Not only are you reimbursed for what you buy, up to around £20 (depending on the assignment), but you also get a paid a few pounds for your trouble.
5. Travel Hacking
Become a travel hacker and save on your next holiday. Travel hacking is completely legal, and isn’t a new thing. The first frequent flyer program was created in 1972 by United Airlines. Since then, there has been a plethora of reward points to collect, and schemes to join to help you travel hack your way round the globe on your dream holiday.
Travel hacking involves working within the existing rules set up by airlines, credit cards and hotels, and using them to your advantage to earn free travel including flights, lodging and other upgrades.
All of these make working for yourself a little more affordable, and allow you to stay in the driver’s seat as your own boss.
This content is brought to you by Nutmeg, an intelligent, fully-managed investment portfolio. They take the best elements of a high-end investing service and strip out all the complexity and cost.