Odds are you would be mad or sad but ultimately you would pay it. You would pay it because you would seemingly have no choice but to do so. Your life would be tough for a while and you would have to change a lot of your habits to reflect the new tax but eventually you would adjust to this new way of life. Eventually you would be so used to it that you wouldn’t even notice that tax being taken out.
Believe it or not, there is a budget that is designed to work in this exact manner. I like to call it the “Self-Tax Budget”. It’s a budget that was originally based off of the ideals of life coach and paid speaker, Tony Robins who purposed the same question when asked how someone could possibly save more to be able to invest in their retirement. It’s a simple budget but it’s highly effective when the user simply decides to commit to it. Here are the rules:
- Rule 1: Everything you buy is subject to a 10% tax
- Rule 2: Track the results of the tax and move that amount from your savings account into a new account that is made for these funds
- Rule 3: Use these funds to invest in your retirement either through stocks, bonds, mutual funds, or index funds
An example of how this works is shown below:
Imagine that you decide that you want to buy a candy bar, a Twix let’s say. The Twix will cost you $1.00 as it is marked on the shelf. However, now that you are following the budget, you are required to write down on your log sheet that you bought a Twix and that the corresponding amount to move into your retirement account is now 10 cents. If you buy nothing else by the end of the day, you simply get onto your online banking account and move over 10 cents into your retirement account. If on the other hand you do buy other things before the end of the day, simply multiply the cost by .10 and that will give you the designated amount that will need to also be moved over at the end of the day.
Eventually by doing this, you will find that it is highly annoying to have to continue to track the numbers. You will also likely be annoyed that you have to continuously get onto your bank account online and move funds. This will then propel you to stop spending so often as to not have to log it in your pay log for the day. This will also bring down your spending naturally through the wonderful power of annoyance. At the end of the month, you will then likely realize that you have both moved a good amount into your retirement amount through the tax and you have also spent less as the month progressed. This is of course assuming you’ve followed the budget.
All this being said, the budget itself can be a highly effective tool for both saving money and changing your spending habits. While it may be annoying in terms of sheer mathematics and tracking time it can be a great self-reporting tool to help bring your spending habits into view.