My $1 Rule Helped Me Get Out of Debt and Retire Early—And It Can Help You, Too

Most personal finance experts advise you not to buy anything you don’t need when you’re paying off debt. But who wants to give up the pleasure of spending and have nothing to look forward to? Not me.

Constantly tracking every penny and slapping myself on the wrist when I went over budget didn’t make me want to spend less—it just made me feel worse when I did. Plus, limiting my spending actually made me want to spend moretrapping me in a cycle of spending and restriction. Now that I’m a financial coach, I understand why. This approach is not sustainable and does not solve the real problem.

In the end, I abandoned the classic advice and created my own spending rule. I’ve changed the way I think about spending, and it’s helped me cut down on expenses without giving up things I need (or want) to buy. It also allowed me to set ambitious financial goals, such as saving enough to retire 30 years ahead of schedule. I share this principle with thousands of clients whom I have helped pay off debt and achieve their financial goals. And now I’m sharing this with you.

Ready to rethink your spending habits? Here’s how the $1 Rule works and why it can change your life.

What is the $1 Rule?

The $1 Rule is my version of the age-old cost-per-use idea, specifically using the dollar as the benchmark. Before you buy something, figure out how many times you will use it. If the cost per use drops to $1 or less, I give myself the green light to buy it.

So if an item costs $100 and you can only use it five times, that’s $20 per use. According to the $1 rule, this purchase won’t be worth it.

This rule works especially well when it is applied to your weak areas, where you tend to overeat. For me it’s clothes, accessories and home goods. I still buy things that I love (and that will bring me a lot of use), but it keeps me from making impulse purchases that might seem like a bargain.

It also encourages me to choose eco-friendly and high-quality items. I’ve moved away from fast fashion almost entirely because even a $5 shirt that I might only wear once or twice breaks the $1 rule.

Typically $1 works for large purchases.

When discussing big expenses like furniture or technology, the price tags look different when you count how many uses you’ll get from them in the first place.

For example, when we bought our last home, it became clear that my old obsession with HGTV was returning. It’s easy to get carried away with decorating your new home and buy more than you really need. But what really value money?

Since my husband and I work from home full-time, we decided that we were willing to pay a little more for quality desks and office chairs. We learned from the previous steps that cheaper tables tend to fall apart easily. So instead of going to Target or buying a table on Craigslist like we used to do, we went to a higher quality furniture store.

We found a classic desk that’s on sale for $699 with a 40% discount to $419. That’s more than I’ve ever spent on a desk, but after using the $1 rule, I figured I’d be sitting in front of it five days a week for 50 weeks a year, which works out to 250 uses a year. The purchase will pass the $1 rule in less than two years.

I felt much more confident about this purchase than in the days when I saved every penny.

Be careful: The $1 Rule doesn’t give you permission to spend money that isn’t in your budget. You still need to pay attention to how much flexible income you have. But using this rule to monitor the purchases you make with your discretionary income can help you put an end to overspending without feeling restricted.

What if an item doesn’t meet the $1 rule?

I still spend money from time to time without following the $1 rule. When it comes to paying for events or travel, the $1 rule doesn’t always work. But that’s when I rely on my budget and past experience to decide if the expense is justified.

The Broadway show Hamilton came to our town while I was focused on paying off my student loans and mortgage. The musical theater geek in me was conflicted by the voices of prominent debt experts who were telling me that buying those expensive tickets would be a mistake. But since I stick to the $1 rule for 99% of my purchases, I knew I could make an exception.

Yes, I bought Hamilton tickets instead of saving extra money to pay off debt, and I have no regrets. But I also did not use credit to finance the purchase. Instead, I swapped other expenses I could make during the month, such as dining out and social events, so that I could pay for the tickets in full without a credit card and without blowing my budget.

The $1 rule won’t always help you decide whether an experience like a vacation or concert is worth the money. But if you stick to it most of the time when purchasing materials, you can free up more money for experiences without hurting your debt payoff goals.

You can pay off your debt and move on with your life.

Leaving room to enjoy my money, I focused on the long and often monotonous journey of paying off debt and saving for the future. At the same time, I relieve myself of the guilt of spending on things that matter to me, and this has helped me build a healthier relationship with money.

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