The 100% personal ‘tax’ trick

The 100% personal ‘tax’ trick

Find it difficult to save money each month? Have you tried ‘taxing’ yourself?

NOTE: if you’re a good saver ignore this post but if you’re one of those people still with the mandatory £1 in your savings account this is probably for you.

The basics:

Whenever you buy anything on an impulse, you impose a 100% ‘tax’ on it, for example lets say you see a £15 bargain DVD box set on Amazon but you have to have £30 to buy it. £15 goes to Amazon and the other £15 goes into your savings account.

Obviously, you’re not going to start doing this for things like rent, electricity, food spending etc but for things that are non-essential it’s a great technique!

More examples:

  • Buying a £10 T-Shirt, you have to have £20 to buy. £10 for the t-shirt, £10 into your savings.
  • Spending £20 on a bottle of alcohol, you need £40 to buy. £20 for the alcohol & £20 into savings. The rest of your essential groceries have 0% ‘tax’.
  • Buying a £40 meal out, you have to have £80 to buy. £40 for the meal and £40 for your savings.

Why is this technique good?

  • It makes you think twice about impulse buys
  • It’s free
  • It makes you accountable for your actions
  • Seeing small amounts leave your current account feels better than one off lump sums
  • It forces you to do something you can’t do on your own
  • There is no excuse not to try it (remember it doesn’t apply to non essential items)

How to make this technique better:

  • Use mobile banking to quickly move cash into savings
  • Keep it to non essential purchases only
  • If you can get a savings account that isn’t linked or shown when you log in to your usual online banking, you ‘forget’ how much you have managed to save!
  • Force yourself to try it for 1 month and see how you feel
  • Keep to 100% tax for the first month at the very least
  • You might think this is stupid but give it a go, you’ve got nothing to lose
  • at the end of the year the ‘tax’ is yours to spend/continue to save.

What do we think? Load of rubbish or worth a go?

 

100% personal tax trick, your thoughts?

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Thanks to our friends over at Lifehacker for the idea.

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Important things to remember with everything we post:

  • If you earn over your personal allowance (currently £12,500 a year) HMRC need to get their % cut (even if the money is in cash or from another country)
  • If you’re working for yourself / earning an income on the side you need to let HMRC know – There are numerous benefits but also some drawbacks
  • You need to always ensure whatever you’re doing is legal and not hurting anyone else – be careful and always think twice
  • Some income streams may require you to have DBS check, licence, insurance or qualifications before you can start to profit from it, do your research.
  • Be careful that any additional income doesn’t compromise your studies or main income/job
  • If you work for a company check your contract, if you don’t inform them you’re working on other side projects outside of work they may have grounds to ownership on this work

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