Do you ever feel anxious or guilty (or both) when buying something? Help may be at hand in the form of a guideline called the “0.01 per cent rule”, which aims to give you clarity about your finances and take the stress out of spending.
Find your daily “Worry-Free” spending number
Created by finance author Nick Maggiulli, the “0.01 per cent rule” is gaining traction for its ability to help with decision-making about spending. Maggiulli suggests that spending 0.01 per cent of your net worth on a daily basis won’t impact your financial standing because it’s akin to the rate of return your assets generate. Say you have $100,000 in wealth, 0.01 per cent of that is $10 – so you could spend $10 a day without feeling any guilt.
Okay, $10 a day is tough to live on. But the rule is more about allowing some frivolous spending. It’s best used to guide decisions on small purchases, such as whether you take an Uber instead of the bus on a rainy day or get a croissant with your latte.
How this approach can reduce money stress
One of the benefits of the rule is that it provides perspective on whether a purchase is sensible or not, helping reduce anxiety in the process. It can also help make money feel less overwhelming. “People see that small increases in spending are unlikely to derail long-term outcomes,” says Dawn Thomas, senior financial adviser at The Wealth Designers. “It also helps people who are anxious about money to reconnect with the idea that wealth is a tool to support life, not something to be preserved at all costs.”
When to be cautious with everyday spending habits
Some experts warn the rule can create a slippery slope when used too often, leading to a lack of discipline. “It can become problematic if it’s applied without self-awareness,” says money coach Karen Eley. “If someone already struggles with impulse spending or uses spending to regulate emotions, this formula can unintentionally justify behaviours that aren’t aligned with their long-term values or cause financial instability.”
But there’s no reason you can’t create your own take on the rule – one that’s tailored to your situation. “Look at a sustainable spending buffer that considers cash flow, debt, upcoming life changes and emotional comfort,” says Thomas. “Confidence comes less from the percentage and more from someone starting to understand how today’s spending fits into the bigger picture.”
Build strong foundations for long-term financial confidence
No matter how useful you find the rule, you still need to get the basics right. “Simple steps like knowing where your money actually goes and having a clear plan for both the short and long term can dramatically reduce anxiety,” says Thomas.