Are you an impulse shopper? Try the 1% rule to keep your spending in check (via CNBCMakeIt)
The way it works is simple: When something you want to buy exceeds 1% of your annual gross income, you have to wait a day before purchasing it. This rule applies to discretionary spending, for things you want but don't need, like new sneakers or the latest gaming console.
Say you want a PS5 selling for $800. If you make $50,000 per year, it would exceed a 1% cap of $500. In that case, you'd have to wait a day before making the purchase. The 24-hour cool down period provides time to re-think the purchase. If you really want it, what harm is there in taking an extra day to think about whether you truly need it?
The 1% rules works best if you make less than $200,000, and your debt payments are manageable already, according to James. And if a 1% cap feels too high, you can limit yourself to half a percent or a quarter of a percent instead. Whatever limit you choose, have a pre-set idea of how much you can spend before you go shopping. If the rule helps you avoid an impulse purchase — even just once — you'd be saving up to 1% of your income.
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