The 5 Dollar Rule
In this episode I share a great financial advice that can be quite beneficial if implemented as a rule in your daily life.
John: Hey, this is John Sonmez from simpleprogrammer.com and today I'm actually going to change it up a little bit and I'm not going to do a question. I’ve been doing a lot of questions and it’s good, I like to answer questions but I’ve kind of missed not doing as many of the standalone topics so I thought I’d give you a standalone topic. A lot of people ask me about finances and I do a lot of topics on that so here’s a financial topic for you out there.
This is kind of a rule that I’ve kind of set for myself over time that I found to be really beneficial. I’m a pretty busy guy and I don’t want to waste a lot of time. I usually use the phrase penny wise and pound foolish. I think a lot of people are penny wise and pound foolish. Today I’m going to talk to you about a rule that I have called the 5 dollar rule.
The 5-dollar rule is basically this rule that if something is less than 5 dollars or it’s going to save me less than 5 dollars, if the amount that I’m worried about is $5 or less just do it. Don’t even think about it. This is a rule—you might change this over time. I think as I’ve done better in my career I’ve sort of graduated this probably closer to the 20 dollar-rule but depending on where you are, maybe it’s a dollar or maybe it’s a 50-cent rule. I don’t know.
A lot of people I find are clipping coupons and it actually—there’s 2 sides to this, right? On the fitness side as well, right? McDonald’s loves to send you these get a free Big Mac, like save $2.50. When you look at the value that you’re actually saving from these coupons it’s like $2.50 and now you’re going to go and eat some fast food that you wouldn’t have eaten before. You get that benefit as well. If you are willing to—say, okay, if it’s $5 or less it doesn’t matter. I’m not going to even think about it. Then you’re not going to get sucked into this. I’ll give you a good example, a story.
This freaks people out. I’ve done this a few times now. I’ve gone to a convenient store and contrary to popular belief I don’t just eat chicken breast. I occasionally do eat a candy bar. I’ve gone to a convenient store and I’ve bought a candy bar and they have this 2 for 1, right? I’ve actually just bought 1 and then the cashier will say, “Hey, you know, it’s 2 for 1. If you pick out another one you can both for the same price.” I’ll just say, “No, I just want one.” Because it actually falls into that 5 dollar-rule, right? You might be motivated to pick up an extra candy bar just because you’re saving whatever the cost of that is which is really like a dollar.
Think about how many things in your life that someone suckers you into doing just because you’re going to save something less than $5. If you implement that rule, what you’re going to find is not only are you not going to make all these ridiculous decisions that you hmm and huh about. Have you ever gone and tried to decide where you’re going to eat based on the coupons that you’ve clipped out? Or if you’re going to buy something, you spend an hour maybe looking at reviews on Amazon and there’s a $5 price difference. Just buy the more expensive thing that had the better reviews. Don’t worry about saving yourself $5. Or oh, it’s $5 shipping or $5 more shipping. Forget about it. Just buy the thing. How much is your time worth?
Most of us are making more than $5 an hour yet a lot of us will spend time to save $5. A gas station is another place that this comes into effect. I’m not going to name names here but I’ve driven around with some relatives of mine who have driven literally across town or waited in line in Costco, right? This is the craziest thing to save a couple of cents a gallon. How crazy is that, right? How much is your time worth? This is something that I’d recommend that you implement.
Again, it’s not that $5 matters so much. I found that for most of us 5-dollar rule is a good place to start. If you make a lot of money maybe you have a 20-dollar rule. Like I said I implement that pretty often now or maybe if you’re really college broke, maybe it’s a one-dollar rule. Whatever it is, consider your time and implement some kind of rule so that you can make these kinds of decisions and you don’t have to—or so you don’t have to make these kind of decisions all day long.
That’s it. Hopefully this advice is useful to you. If it’s useful to you, it’s probably useful to someone else. Share the video and don’t forget to subscribe. Take care.