Do you compulsively spend and then regret it later?
Does it seem like you can never catch up on your credit card bills and you’re never building your savings account the way that you intend to?
Financial experts have a solution, and it’s being dubbed “the 1 percent rule.” For people that are always seemingly dealing with money issues, it can be a nice strategy to more carefully analyze any major planned purchases. In this post, we’ll take a closer look at the 1 percent rule and how it might be able to help you with your spending should you need a spending check from time to time.
Simply put, the 1 percent rule challenges consumers to think more carefully about any major purchase they’re considering that is the equivalent of 1 percent or more of their annual salary. Assuming someone earns an annual salary of $70,000 per year, the steps below outline how it’s intended to work:
- You’re considering making a purchase that costs $700 or more. (One percent of $70,000 is $700.)
- Instead of making the purchase impulsively, you deploy the 1 percent rule, which asks that you wait at least one day before buying any purchase that is priced at least 1 percent of your annual salary. As you wait to make the purchase, you can better mull over whether or not you need it, can afford it and will use it. You can also properly weigh whether or not you will regret the purchase.
- If after one day you still are set on making the purchase after giving it considerable thought, then go ahead and make that purchase.
Financial experts say the 1 percent rule is a good one for anyone making $200,000 or less per year and can help curb buyer’s remorse or even the hassle of having to return an item that was not a well-thought-out purchase.
Now, it’s worth noting that the 1 percent rule isn’t for everyone. This is especially true for those who tend to be stingy with their money and are already meeting their savings and debt management goals. But it is a simple strategy that’s designed to help people put more thought behind any significant purchases and better help them gauge whether making the purchase will impact any of their other financial goals.
Let’s face it, regardless of how much money we earn per year, we’ve all likely made impulse purchases from time to time. And buyer’s remorse is certainly a real thing. Reflecting on this simple, yet seemingly effective rule, could you see yourself utilizing the 1 percent rule to properly weigh whether or not a purchase that you’re considering is a wise one?