In this day and age, it can be difficult to avoid making impulse purchases. The option to “Shop Now” on Instagram or “Add to Cart” in TikTok Shop makes it a little too easy to buy those trendy jeans or band t-shirt without thinking much about it.
Those purchases can add up over time, making it more challenging to focus on what should be a priority: funding your emergency fund, IRAs and 401(k)s.
Many personal finance and retirement planning experts recommend cutting out all unnecessary expenses, adhering to a strict budget, and sticking to that budget until all of your “consumer” debt, including credit cards, car loans, and student loans, is paid off.
Only then should you focus on your retirement planning.
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In an exclusive interview with TheStreet, Bernadette Joy, a personal finance coach and author of “CRUSH Your Money Goals,” shared details about how she and her husband paid off around $300,000 in student loan and mortgage debt and then started saving for retirement.
Joy retired in February 2024, debt-free, the same month she celebrated her 40th birthday.
Author Bernadette Joy explains how the dollar rule will allow you to make guilt-free purchases.
Bernadette Joy/TheStreet
How to live within a budget and not be miserable
“Constantly tracking every penny and slapping myself on the wrist [when I bought something] didn’t make me want to spend less — it just made me feel worse when I did buy something,” says Joy.
So, the advice many personal finance experts give about cutting spending to the bone didn’t work for Joy and her husband.
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“Instead, we did the opposite,” she says. “We became adamant about spending on things we really loved and cut back on the things there were ‘nice to have,’ or impulse buys, or just convenient.”
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Joy did this by amortizing out every purchase. “We only bought things that cost $1 or less per use,” she says.
That one habit helped her pay off debt and stay on track with her ambitious goal: to save enough for retirement thirty years ahead of schedule without reverting to previous “bad” spending habits.
How to apply the $1 rule so you can save more for retirement every month
“The one-dollar rule is simple,” says Joy. It’s basically cost per use. To calculate the cost per use, take the price of the item and divide it by the number of times you’ll use it. Want that new couch that has a $1750 price tag? Do you love it enough that you’ll sit on it every day for the next five years? Go for it. Will you really use that $300 handbag every day for a year? How about that Le Creuset Dutch oven with the eye-popping $250 price tag? Will you really use it 250 times?
Joy says when she shops for her favorite binge items — clothing, accessories, and home goods — she takes it a step further. “If an item comes out to $1 or less per use, I give myself the green light to buy it. No analysis paralysis,” she says.
“The one-dollar rule has not only kept me from spending on things I don’t need but removed guilt and debate when spending on things I do need,” says Joy.
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