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Force Yourself To Save With A 100% Personal Tax

Since everyone loves taxes so much (right??), let’s talk about a tax that’s a little bit more fun and interesting than income taxes.

With income taxes, you pay the government for money you earn. But with a personal tax, you pay yourself for money you spend.

I stumbled upon a Reddit post of a 29 year old looking for help curbing an expensive spending problem. He and his wife make a decent income and have great pensions and their only debt is an $8,000 car loan at 1.9%. Despite that, they have basically nothing saved up. They just are not good savers.

One reader commented (and I am posting his idea with his blessing) with a solution that I think is great in this situation, but can and should be used by anyone who has a difficult time saving money each month.

How Does A Personal Tax Work?

The idea is a 100% personal tax. Whenever you buy something that isn’t a necessity, you impose a 100% tax on yourself that goes toward your savings account. For example, if there is a Blu-Ray you want to buy on Amazon for $20, you have to have $40 to spend on it. $20 goes to the Blu-Ray and $20 goes to the savings account. As the redditor puts it, “your larger savings plan can dictate where the money goes that accumulates in this account. (i.e. IRA, 401k, emergency fund, etc)”

Who Should Use a Personal Tax?

This plan is not for everyone. It’s not for Lauren and me because we are already saving nearly 50% of our after-tax income. We save plenty (some would say more than enough) and we already have our motivation to save.

This plan is for people who make more than enough to cover their basic needs but who, at the end of the each month, find that they are not saving as much as they want to.

The 100% personal tax is great for a few reasons:

  • It’s free
  • It keeps you accountable
  • It forces you to do something you can’t do on your own

If you aren’t able to save much each month, give this a try for a month. There’s no ‘I can’t afford it’ because this only applies to non-necessary purchases. You don’t need to match your rent and food spending, only items and activities that you choose to partake in. Your needs aren’t taxed, only your wants are.

Do you need a little more help saving? Would you try the 100% personal tax?

Update: There’s now a way to automate the 100% personal tax!



  1. Or you could even go European style with a 150% Personal Tax!

    Just kidding, don’t get all fired up, you political types.

  2. This is a good strategy, but you’ve still got to be disciplined. In other words, you’ll know the money is still there in your savings account and you could still give in to temptation to spend it. It’s like going on a diet, the cookies and ice cream are still only 5 minutes away at the grocery store!!

    • @Mr. Utopia @ Personal Finance Utopia, yes, but I would think (and hope) that someone who is willing to put that money in a specific savings account is also going to put that money in an investing account where it’s a little harder to touch (or to pay down some debt).

  3. Obviously, this a great saving’s idea! But, let me add a little
    twist to your approach to this 100% savings program.

    If you decide to go forward with this “program”, my I suggest
    that Do Not put all your money into just an “ordinary “saving’s
    account at your local bank.

    The monies you will be using for your “savings program” will be
    coming from your “post-tax” dollars, i.e.: income you have already
    paid taxes on, to Uncle Sam. This is an important factor to remember!

    Keeping that in mind, let me make a suggestion. Put a certain
    percentage of your money into it’s own “special” savings account,
    say 50%. The “other 50%”, deposit it where it will take a little more
    time and effort for you and/or your spouce to access.

    As mentioned in the above article, it suggests depositing your
    money into an “i.e. IRA, 401k, emergency fund, etc”. If memory
    serves me, monies deposited into an “regular” IRA or 401K plan
    are taxable, when you start withdrawing them from your particular
    plan at retirement, or age 59 1/2. If this is correct, you may want
    to consider the following option.

    The “other 50%” of your “savings” (if that’s the percentage you
    decide to go with) you might want to consider depositing into a
    “ROTH IRA”. A ROTH IRA is funded with “post-tax” dollars.
    So, when you withdraw your money (following the ROTH IRA’s
    guidelines) no additional taxes are required by the IRS, Feds, etc.
    This is because, you have already paid the taxes on the money
    when you originally earned this income!

    What is really great, is when this program was initial set-up by the
    government, it also “allowed” that any additional “investment profits”,
    due to your smart investing, are also TAX FREE! This is one heck
    of a deal, when you consider the long term possibilities!

    I believe ROTH IRA’s still work this way. But, to be absolutely positive
    on all of the particulars, CHECK WITH YOUR ACCOUNTANT, OR
    FINANCIAL ADVISOR to verify if this is still a viable program.

    Best of luck with your “100% Saving Program”!

  4. Very interesting idea – but that pesky want vs. need question will be a constant struggle!

    • @Emily @ evolvingPF, We can trick ourselves into believing that most clothes are needs when really a new pair of shoes or another dress shirt is more of a want. I would tend to be strict on this, though I suppose it’s up for interpretation.

  5. I love this idea for people that have trouble with frivolous spending. 100% is a lot though. Maybe start with 10% and increase that every month so people don’t burn it and think it’s not possible to follow.

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