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?

You may also like:

• Key points from The Budget 2016
• Is having a ‘Emergency Fund’ enough? Should I have more ‘funds’?
• Why we make bad decisions

Thanks to our friends over at Lifehacker for the idea.