A simple yet effective strategy, the 30-day savings rule is something anyone can implement in their financial routine to help curb impulsive spending.
The rule, which encourages people to pause and reflect on nonessential purchases for a month before making them, can lead to substantial savings growth. It’s especially salient at a time when 57 percent of Americans are uncomfortable with their level of emergency savings.
Here’s how the 30-day savings rule works and how it helps you save.
Understanding how the 30-day savings rule works
The premise of the 30-day savings rule is straightforward: When faced with the temptation of an impulse purchase, wait 30 days before committing to the buy. During this time, take the opportunity to evaluate the necessity and impact of the purchase on your overall financial goals.
Some questions you can ask yourself during the month-long interval before making a decision on the purchase are:
- Is the item/service a need or a want?
- Can I afford it without sacrificing other financial goals?
- Have I researched better deals and alternatives?
- Can I allocate the money to a higher priority?
You can apply the rule to both large purchases and small daily expenses. Imagine being tempted to purchase a high-end electronic item for $800. Waiting 30 days provides time to assess whether the item is a genuine need or a fleeting desire, encouraged by flashy marketing.
Or, consider a daily habit, such as buying a cup of specialty coffee for $6. Over the course of a month, this routine can accumulate to $180. Applying the 30-day rule in this case might mean making coffee at home for a month and potentially redirecting that money toward savings or debt repayment.
What is impulse spending?
Impulse spending refers to the spontaneous purchases made without thorough consideration or a genuine need. It’s the quick decision to buy something simply because it’s momentarily appealing.
While it might lead to a sense of instant gratification, impulse spending can contribute to a number of long-term harmful effects taking aim on your wallet. It can erode your budget, diverting funds from essential expenses or financial goals. It can also lead to increased debt and diminished savings. Eventually, it might cause a strain on your financial well-being and mental health, due to feelings of guilt, regret and struggling to keep up with your finances.
By introducing the 30-day rule into your life, you directly address impulse spending. The rule acts as a cooling-off period, encouraging time for reflection and a more intentional approach to spending. It can help you distinguish between genuine needs and impulse wants while minimizing buyer’s remorse.
Tips for implementing the 30-day rule
To make the most of the 30-day rule, follow these steps:
- Create a wishlist: Maintain a list of items you desire to purchase and revisit it after the waiting period is up. You might find that some of those items have lost their appeal.
- Track savings: Use a dedicated savings account for the money you save by resisting impulse spending. Seeing how your savings grow can serve as a continuous motivator.
- Prioritize financial goals: Consider how the potential purchase aligns with both short-term and long-term financial goals. Redirect funds toward these goals as needed.
- Use a budgeting app: You can leverage technology to help you keep track of your spending and goals. Apps like PocketGuard and You Need a Budget can provide real-time insights into your spending habits, so you gain awareness of how you tend to impulse buy and where to focus on saving more.
- Reward yourself occasionally: Not every purchase needs to be put off. It’s important to have an intentional reward system in place to make the process of curbing impulse spending more enjoyable. Just make sure that the rewards remain in your budget — a reward can be something non-transactional, too, such as a day trip to the beach.
Bottom line
By incorporating the 30-day rule into your financial toolkit, you can not only control impulse spending but also establish a solid foundation for long-term financial stability. Consider redirecting savings to an emergency fund, to ensure that you have a financial buffer in the case of an unexpected expense.
FAQs
The premise of the 30-day savings rule is straightforward: When faced with the temptation of an impulse purchase, wait 30 days before committing to the buy. During this time, take the opportunity to evaluate the necessity and impact of the purchase on your overall financial goals.
What is the 70 20 10 budget rule? ›
The 70-20-10 budget formula divides your after-tax income into three buckets: 70% for living expenses, 20% for savings and debt, and 10% for additional savings and donations. By allocating your available income into these three distinct categories, you can better manage your money on a daily basis.
Is the 50/30/20 rule realistic? ›
The 50/30/20 rule can be a good budgeting method for some, but it may not work for your unique monthly expenses. Depending on your income and where you live, earmarking 50% of your income for your needs may not be enough.
What is the 30 savings rule? ›
The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
What is the 60 20 20 rule? ›
Put 60% of your income towards your needs (including debts), 20% towards your wants, and 20% towards your savings.
Which is better, 50/30/20 or 70/20/10? ›
The 70/20/10 Budget
This budget follows the same style as the 50/30/20, but the percentages are adjusted to better fit the average American's financial situation. “70/20/10 suggests a framework of 70% of your income on essentials and discretionary spending, 20% on savings and 10% on paying off your debt.
What is the 60 40 30 rule? ›
60/40. Allocate 60% of your income for fixed expenses like your rent or mortgage and 40% for variable expenses like groceries, entertainment and travel. 30/30/40.
Can you live off $1000 a month after bills? ›
Living on $1,000 per month is a challenge. From the high costs of housing, transportation and food, plus trying to keep your bills to a minimum, it would be difficult for anyone living alone to make this work. But with some creativity, roommates and strategy, you might be able to pull it off.
What is the 40 40 20 budget rule? ›
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
Is $4000 a good savings? ›
Ready to talk to an expert? Are you approaching 30? How much money do you have saved? According to CNN Money, someone between the ages of 25 and 30, who makes around $40,000 a year, should have at least $4,000 saved.
The 30% Rule Is Outdated
To start, averages, by definition, do not take into account the huge variations in what individuals do. Second, the financial obligations of today are vastly different than they were when the 30% rule was created.
What is the 80 20 30 savings rule? ›
It is a simplified version of the 50/30/20 budget. The rule requires that you divide after-tax income into two categories: savings and everything else. As long as 20% of your income is used to pay yourself first, you're free to spend the remaining 80% on needs and wants.
What is the 7 rule for savings? ›
The seven percent savings rule provides a simple yet powerful guideline—save seven percent of your gross income before any taxes or other deductions come out of your paycheck. Saving at this level can help you make continuous progress towards your financial goals through the inevitable ups and downs of life.
What is the 70 rule in budgeting? ›
By allocating 70% for what you need, 20% for what you want (either immediate luxuries or future savings goals), and 10% for your goals (like paying off debts and saving or investing in your future), you can work towards a greater sense of financial wellbeing.
What is the 80-20 rule in strategy? ›
The 80-20 rule is a principle that states 80% of all outcomes are derived from 20% of causes. It's used to determine the factors (typically, in a business situation) that are most responsible for success and then focus on them to improve results.
What is the 50 30 20 rule in your financial plan? ›
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let's take a closer look at each category.
What is the 70/20/10 model with examples? ›
With the 70:20:10 model you learn 70% from on the job experience and from doing. You learn 20% from others in the way of observing, coaching and mentoring. 10% is down to formal training like courses, reading and online learning.
What is the 50 30 20 rule of budgeting examples? ›
For example, if you earn ₹ 1 lakh, you can allocate ₹ 50,000 to your needs, ₹ 30,000 to your wants and ₹ 20,000 to your savings, every month.
What 30 in the 50 30 20 rule of budgeting is for your needs? ›
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
