After reading one of Frugalwood’s case study, where the couple made less money than we did and yet, managed to save a lot more than we did, I decided to implement a drastic (for us) austerity plan of saving 20% of our income this month and implementing a Sabbath round up (explained below). We also took the additional salary that my husband got this month and sent it away to debt in the country where we used to live. And, I also paid off all of our outstanding U.K. credit card debt this month that isn’t at 0%. It is quite possible that come the end of the month, we will have no money, and may be using our overdraft. But I find that it is easier to make drastic savings plans at the start of the month and then scream “Good God” once halfway into the month, when you realise that you have no money and have to tighten your belt. Maybe you don’t like living in a monthly rollercoaster of second period implemented austerity? If so, you may do well to ignore me.
So this is the first month where we implement the 20% savings rule and the Sabbath round up. What is the Sabbath round up you ask? I am happy to tell you!
The Sabbath round up is a new thing that I am trying where every Friday, I take our current account balance and round up to the nearest 50 or 100 pounds. That means if the bank account is at £235, I would round up to £250. If it is at £256, I round up to £300. I then take the difference between the rounded value and the actual value and put that amount into our savings account.
We also need to pay off a significant chunk of our debt. We have about 1 years worth of our (after tax) annual salary combined in debt and varying degrees of interest, with about 20% of that in high interest rate debts (interest rates > 10%).
Because I find a schedule rather than a long term objective easier to work with, I’ve planned the steps throughout the month. At the start of the month, I put 20% of our income into a ISA. Each week, I perform the Sabbath roundup. Hopefully by the end of the month, we wont have scurvy and or owe as much as our savings in overdraft payments. The list below lets you know what we do and when and can be an easy reminder.
- At the start of the month, finish last month’s budgeting and start this month’s budgeting using our Kakebo pages. File last months away in the binder.
- Automatically set aside 20% of our after tax income into a ISA so as to build up a 3 month emergency fund (this is a direct payment scheduled, I don’t have to touch this)
- Do the Sabbath Round up each week on Friday
In terms of paying off debts, we also try to do the high to low interest pay-off strategy
- Pay off all the higher interest debt first, starting with the line of credit and the credit cards
- Try to stay out of our overdraft at the end of the month
- Save 66 pounds a month to pay off long term debts that have 0 interest plus make all our monthly debt payments
- Put any extra money from second jobs and bonuses onto car and student loan payments
