5 Simple Spending Rules That Helped Me Escape The Rat Race

There are many different ways you can start to improve your financial situation.

But, none are easier than taking a look at your spending, to see where you could cut back.

Like I always say, it’s about one thing, and one thing only: Disposable income.

Here are 5 spending rules I have, so I can build wealth for years to come.

The 100 Day Rule

The 100 Day Rule is a question I ask myself, every time I want to buy something I don’t need.

This doesn’t apply to necessities, like:

• Rent/mortgage

• Groceries

• Phone bill etc.

But, more for things like:

• Video games

• Clothing

• Household items

The question, is this…

Will this item be of the same value to me on day 100, as it will on day 1?

What this means is, will I still be using something in 100 days?

Will it still be of value to me over time?

The reason I implemented this rule was because I found myself wasting a lot of money on video games.

I’d buy a video game that some friends were playing for $60, and only play it for a few hours and never touch it again.

A terrible waste of money.

So now, I emphasise the importance of thinking into the future, and it’s saved me from wasting thousands.

I’ve started running this year, and only recently have decided to invest in a high quality pair of running shoes.

Will these have the same value to me on day 100? Yes.

So, it’s a worthy purchase.

You get the idea now. Sometimes, it’s important to look into the future to cut out spending that you might regret.

So, next time you buy something, consider the 100 day rule.

Must Afford Twice

This is a rule I use for bigger, more long term purchases, like:

• A new car

• New computer

• New mobile phone

Anything over $1,000, I’d say to use this rule.

It’s helped me avoid overspending on expensive items that a lot of people spend too much on.

When it comes to expensive items, like those listed above, a lot of people don’t have a budget.

The concept of money goes out the window, and a lot of people find themselves overspending…

• Buying a car that they can’t afford.

• Buying a computer that’s too big or powerful.

• Buying too much phone storage.

It can be a status thing, too.

Some people don’t pay attention to money so they can seem more affluent.

More people go broke overspending on expensive items, than overspending on cheap items.

So, I’ve implemented this rule for several years now. When you make a large buy, say over $1,000, you must be able to afford it twice.

Most people:

I have $70k to buy a new car! I’m going to get a $70k car!

Me:

I have $70k to buy a new car! I’m going to get a $35k car!

Next thing you know, the car has lost 10% of its value in the first 12 months.

I’ve lost $3.5k in equity, and you’re down $7k. Meanwhile I also have an extra $35k in the bank.

You blew an extra $35k.

Why? Because you had the money, so decided to spend it.

It’s a bad move, and one you’ll regret.

This emphasises the importance of financial literacy.

Pay Yourself First

Pay yourself first is a three word term that gets thrown around a lot in the world of personal finance.

But, what does it mean?

Pay yourself first means you should put money towards your future, before your present.

A problem for a lot of people is that their spending priorities look like this:

1. Needs

2. Wants

3. Investments

And in truth, by the time people do 1 and 2, they have no money left for 3.

But, if you want to build wealth, it should look like this:

1. Investments

2. Needs

3. Wants

Or, at least:

1. Needs

2. Investments

3. Wants

This way, by investing before spending on wants, you’re guaranteed to build wealth.

You no longer “invest if you can”.

You begin to “invest regardless.”

This is paying yourself first. Prioritising your future financial health, over present impulses.

It’s a simple mindset switch that helped me start the habit of investing.

If you can, set up a deposit to invest as soon as you’re paid each month.

You can almost consider it as another tax, except you’re getting the full benefits of this one.

Have A Splurge Budget

You’re never going to be perfect when it comes to spending.

We all like to treat ourselves ever now and then, even if that means wasting some money.

So, budget for it. If you can account for poor spending, you’re way more likely to succeed.

Give yourself a few hundred dollars each month (or less, or more, it’s up to you) and spend it in any way that you want.

A large part of spending in general is 2 things:

Accountability & discipline.

If you can account for poor spending, that’s alright. Just make sure you can offset it with putting money towards your future.

Spent $100 on a jacket? Good for you.

Now go and invest some money to balance it out.

You’ll be in a better place by implementing this rule. You can still reward yourself, whilst not going over your budget.

It’s something I’ve done for several years now.

The journey to financial success… is a journey.

You’ve got to enjoy the process.

Sure, the more you sacrifice, the faster you’ll get to where you want to be.

But, this isn’t always the most sustainable approach.

If you can go on without a splurge budget, that’s great.

But, don’t feel guilty for spending money on something that might not benefit your future.

As long as you’re spending within reason, and you’re still:

• Staying disciplined

• Working on increasing your income

• Investing for your future

You’ll do well for yourself.

Avoid Impulses

This is the hardest one, but it’s why rule number 4 is so valuable.

We all have impulses, and this even goes beyond personal finance.

Certain things bring us joy, so we go after them:

• Junk food

• Video games

• Social media

And impulse spending can fall into this category for some people.

But, that’s okay, because I have a solution to helping you avoid impulse spending.

The solution is simple: education.

People struggle with impulse spending because they have little knowledge of money, and the powers it possesses.

When I began to study the world of personal finance, my impulses died because I had better ways to spend my money:

• Investing

• Self growth

• Starting a business

Rather than wasting it on sudden spikes of dopamine.

So, if you struggle with impulses, you need financial education.

Knowing how valuable money can be to your life, will stop you making poor financial decisions.

The more you know, the better your life becomes.

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