A ‘Treat Yourself Tax’ Might Be the Savings Hack You Need
Written by
Lydia Kibet
Edited by
Jenna Klaverweiden
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There’s something undeniably satisfying about indulging in a small treat after a long day or hitting a certain milestone. Treating yourself to an iced matcha from your favorite café or a new pair of shoes often feels well deserved. While these purchases make you happy in the moment, such guilty pleasures can quickly add up and cost you a lot of money.
The good news is that there’s a way to turn these little splurges into more money in your savings account. Here’s why a ‘treat yourself tax’ might be the savings hack you need.
What Is the ‘Treat Yourself Tax’?
The “treat yourself tax” is a rule that helps you stay in line with your budget without denying yourself life’s pleasures. Whenever you splurge on a nonessential item, you’d put the same amount in savings. For example, if you splurged on a $7 iced matcha latte, you’d put $7 straight into your savings account. Another $150 on a pair of sneakers? You’d immediately transfer $150 into your savings.
Unlike traditional budgeting that makes you feel like you’re grounded for life, this strategy works with your spending habits, not against them. Instead of denying yourself those small indulgences that make you happy, you enjoy the moment while creating a financial cushion.
Why It Works
The “treat yourself tax” can remove guilt from your purchases. Rather than feeling bad about splurging, you can enjoy the present while securing your financial future.
Additionally, it promotes conscious spending. When you think about the “tax” every time you splurge, you’ll start paying more attention to whether you really need the item.
This strategy also helps you hit your savings goal faster. Many people struggle to save because they do it only when they have extra money left. But a “treat yourself tax” builds a saving habit because it’s tied to every nonessential purchase.
How To Implement It
This is worth a try if you’ve been struggling to save. The first step is to figure out what purchases would have this tax. Essential expenses, like groceries, rent and utility bills, don’t count. Think about discretionary expenses, like takeout, apparel or a new device.
Next, set up a savings account, preferably one that grows your idle cash, like a high-yield savings account. Commit to matching every discretionary purchase with a savings transfer. Make these transfers immediately before you forget or talk yourself out of it.
The best part about the strategy is that it’s adjustable. If you’re in a tight financial spot, you can adjust it to a specific percentage instead of the full amount. And if you want to hit your savings goal faster, you can implement a double tax on certain categories.
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