The $1 rule can turn your life around. Here’s how it works

A financial influencer I follow, Bernadette Joy, recently shared her $1 rule, and I happen to use a very similar one when it comes to making purchases.

Instead of adopting the traditional scrimp-and-save method to try to wipe out debt or build savings, this “buy it if you’re going to get good value from it” approach is pro-spending, but only if the math looks good. 

From a money psychology perspective, it tends to be more effective because it’s less restrictive and more sustainable. It’s the same approach new-school weight loss and wellness apps like Noom use; enjoy your food, enjoy your version of physical activity, and use real calculations to determine if you’re making progress toward your goals.

Joy’s version of the rule is simply to take the cost of something, divide it by the number of times you’ll use it, and if it’s less than $1 per use, she buys it. 

If it’s more than $1, she walks away from the purchase (obviously there are some exceptions and I’ll outline how those get handled in a moment).

The $1 rule in action

If you’d like to try this rule and see if it helps you to save money and feel better about your finances, it works like this: 

Let’s say you’re thinking about buying a cheap pair of shoes (fast fashion, is what that’s often called). If they are $50 and you’ll only wear them twice, that means your cost per use is $25. Using the $1 rule, that’s a hard no!

Alternatively, you might consider spending $350 on much better quality shoes, but you know you’ll wear them for years, and probably get about 400 wears out of them. That’s less than $1 per wear ($0.875 per wear to be exact), and therefore would be a thumbs-up to purchase. I recently donated a pair of Kate Spade shoes that followed this exact formula and still looked great after eight years, but it’s hard to push a stroller and run after my little ones in heels.

The hidden benefit in the $1 rule

Taking a pause to whip out your smartphone and run this calculation before you purchase is also valuable. I teach my students that a “powerful pause” only needs to be a minute to effectively shift you from spending on autopilot into take-control mode, and when you sprinkle in a cost-per-use calculation, not only will you be in complete financial control mentally, you’ll have concrete math to guide your decision-making.

I think this goes without saying, but the $1 rule only applies to money you have. It’s not for purchases made using debt. Those should be nixed off your list unless it’s for a life essential. A powerful pause often gives you a quick moment to ask yourself, “Do I have the money in my budget?” versus racing to make a purchase without thinking it through.

How to handle the exceptions

Concert tickets. Travel experiences. Tutoring for your kids. Campsite bookings. There are plenty of experiences that won’t fit perfectly into a cost-per-use formula (can you even quantify the value from attending a Taylor Swift concert? It’s priceless, right)?

Here’s my advice around these exceptions. Prioritize experiences that are going to be most valuable and meaningful to you. If driving lessons will change your whole life, and possibly your career, you’ll probably choose that over tickets to see “Wicked” on Broadway with your friends. If travelling through France is a lifelong dream, choose that one big trip over a series of mini-getaways you’re not that excited about. If private tutoring for your kid would make the difference between graduating or not, take out your wallet, and pay for those life-changing lessons.

There are always ways to be mindful and frugal when paying for these exceptions; buying on sale, negotiating prices, using up points, purging and selling things you don’t need, bartering, swapping and more.

The $1 rule is all about stretching your hard-earned money as far as it can go. It’s going to prompt a mental-prioritization exercise, which is an important financial skill. It’s a guilt-free framework for spending. My version of the $1 rule, btw, is a bit more flexible than Bernadette Joy’s. I look at the cost per use on an item-by-item basis and ask if that’s worth it to me.

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star