How to Trick Yourself Into Saving More Money
According to a survey conducted by GOBankingRates, here in America, roughly 41% of men, and 56% of women report living paycheck to paycheck. Additionally, 52% of men and a mind-blowing 69% of women report not having enough to cover just 6 months’ worth of expenses (the golden rule for emergency savings)!
What this means is that one little blip in employment, or a sudden unforeseen expense like a car repair bill can completely wipe out the average American household. No wonder we as a society are so stressed and strung out. There’s just so little margin of error! There’s just too little wiggle room. It’s suffocating isn’t it?
Do you find yourself in this situation? Always feeling like you’re falling behind? No matter what you do, no matter how hard you try, you feel like you’re running faster and faster on the treadmill of life but you’re simply just running in place?
How would you feel if 5 years down the road, 10 years down the road, or God forbid 20 years down the road, you were literally at the same place you are at right now. Running in place. With zero in your bank account, a never-ending mountain of debt on your shoulders, and no end in sight.
That is just straight up depressing.
So what are you supposed to do? This isn’t the first time you’ve tried saving more money right?
Here’s the thing: you have to try something different. You have to change your circumstances, starting with your mentality. That might sound a little woohoo, but at least read on. What’s it going to hurt? If you’re still running on that ol’ treadmill, it’s not like you’re going anywhere else anyways. Might as well explore some potential options.
Tax Yourself. Yes, Just Tax Yourself!
What does that even mean?
Just take a second and imagine this with me.
Let’s say the president and congress got together and decided to pass some new tax regulations. But rather than reforming tax to be lower, they decide that our country is already in too much debt, so they decide to increase our taxes. But to be fair to everyone, they decide on a flat tax rate. So that no one has to pay more or less than anyone else. Everyone has to pay the same amount of their wages.
That sounds all good and dandy; but in order to aggressively chip away at our nation’s mountain of debt, they decide to impose a 50% tax rate on everyone. It doesn’t matter if you’re making minimum wage or if you’re making six or seven figures a year. Everyone pays 50%.
Now seriously. Take a moment and think about that. What if something like this really happened.
What would you do?
I’ll tell you what you’d do. You’d pay 50% in taxes. That’s what you’d do.
How could you not?
If the government mandated that everyone had to pay 50% of their income in taxes, or risk huge fines or even jail time, there would be no way around it! Yeah you’d probably cry and scream and protest in the streets. But at the end of the day, guess what: you’d end up having to pay out half your wages back to the government.
As a matter of fact, this isn’t that far from reality. Because in many countries outside of the US, governments around the world tax their citizens way more than what the US currently taxes.
For example: did you know that the personal income tax rate in Japan in 2016 was 55.95%?!?!
Compared that with the USA (where we have a progressive tax system at the federal level), where the average effective federal income tax rate was just 13.5% with an average of 9.9% in state and local taxes.
Some Countries by Tax Rate (Hint: the US Has Such Low Taxes, it Didn’t Even Make This List)
What Tax Rate Are You Currently At?
If you don’t like numbers, no need to kill yourself over it. Just guesstimate using the table below.
Here’s what the federal tax brackets are going to be for this year (2017). At the average income level, your tax rate is going to be in the 15 – 25% rate. But because we have a progressive tax system here in the the US, what that means is that, only every additional dollar above the previous tax bracket will be taxed at the higher rate.
So for example, if you made $50,000 and you filed married jointly, that means you pay 10% on the first $18,650 of income, and then 15% on the left-over $31,349. So all together, it’s a lot less than 15%. This doesn’t include your state income tax. But some states, like Florida, Nevada, Texas, or Washington, don’t have any state income tax.
So Now That You Know How Little Tax You Pay, You’re Going to Act Like the Rest of the World
You need to up your tax rate to match the rest of the world. We’re not going to talk about politics at this point, or argue about whether or not health care is better in other countries or what entitlements this country gets over that country. Let’s just keep this simple and say a tax rate between 40 and 50%, to match what a lot of other developed countries out there do.
So if you are paying a total of 20% in taxes (federal + state), you need to tax yourself an additional 20 – 30%. You just have to force it. Just tell yourself that you’re in a dystopian future where the US has become a socialist nation (hey, no talking politics! And no I’m not inferring anything about today’s political climate and the political tilt of the average millennial, lol).
So tax yourself the extra 20 – 30% and have it automatically taken out of either your paycheck or your account (this is key – some sort of automated savings; preferably so that you never see the money actually hit your checking account – you won’t miss what you don’t ever see).
This is the best way I can think of, to convince yourself to save more.
The fact that you have the privilege of paying so little in tax compared to the rest of the world. And to think that in the future, there’s a possible chance that taxes will go up. By a lot, if we follow what the other countries are doing around the world. So why not save yourself the headache and stress, by starting now, rather than a 50%+ tax rate being forced on you down the line.
At least if you start now, you’ll get a head start and be able to create some decent financial wiggle room for yourself for when the crap hits the fan!
Wikipedia – Income Tax in the United States
Bankrate – States with no Income Tax: Better or Worse?
Were you aware how low taxes were in the US compared to a lot of developed countries all over the world? Now that you know how “easy” we have it here in the US, does it make you reconsider maybe putting more of an effort towards saving and less on spending?