Friday, January 17, 2014

Taxing Yourself 100% When You Spend

While trying to live a minimalistic lifestyle, there is still an indispensable need - the need to spend, the need to feel human.

If you have pondered over and have had sleepless nights thinking about that shiny gadget over on the shelves, and you really think you deserve it after asking yourself if it adds value to your freedom, then you know what? Go get it.

Be honest with yourself, of course.

However, I stumbled upon this great article over at 'Sweating The Big Stuff' about a 100% personal tax when you spend. The concept goes like this: whenever you plan on buying a 'fun' item, impose a 100% personal tax on yourself which goes to your savings (or Freedom Fund in my case). This means that if your 'fun' item costs $300, then you should bank in another $300 into your savings account.

Simple, isn't it?

Of course there's always the thing about self-discipline, but here's the twist to the concept that I thought would be really useful.

Instead of immediately buying a 'fun' item and banking in the equivalent, why not wait out on the idea of purchasing that item until you have saved up the item's cost plus the 'personal tax'. So, if your 'fun' item costs $300, why not wait till you have $600 in extra discretionary income before making the purchase?

The rationale here, is that the waiting out period will help to ensure if that purchase was not made on an impulsive urge. Therefore, if you still want that item after 2-3 months of waiting out, then at least you are sure that the purchase is not based on the spur of a moment.

Well, that's basically how the concept works. Watch your freedom fund increase by the same amount when you splurge on a 'fun' item (do take into account that you should first pay yourself a fixed, untouchable amount each month, before even thinking about 'saving' up for this 'fun' item).

So if you think you want to spend on something out of the necessity list, buy it, but tax yourself 100%.

After all, minimalism should not make you miserable.

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