Spending too much can cause shame and regret that can overwhelm you, which can lead to financial failures. Conversely, if you don't spend on the experiences or things that bring joy to your life, it can lead to a feeling of deprivation. How can you strike the right balance? As an accountant, money advisor and host of Popcorn Finance podcast, I am able to hear the creative ways people cut back on their spending. Glenn James hosts My Millennial Money, one of Australia's most popular podcasts about finance.The 1% spending rule: To Buy or Not to Buy?James shared his 1% spending rule with me. He came up with it after he bought an Apple Watch at a department store for $1,300 with friends. James, who is a compulsive spender, said that it was a problem because he didn't plan to buy a watch that would cost more than a thousand dollars when he woke up in the morning. He realized that he needed a way of controlling his spending and decided to do so immediately. James' 1% spending rule, not to be confused with real estate's 1% rule, is simple: You must wait at least one day before you spend money on something that you don’t need or costs more than 1% of your annual income. Ask yourself: Is this something that I actually need? Do I have the money to buy it? Can I afford it? Will it make me regret? After a good night's sleep, it may still seem like a good idea. If so, go ahead and purchase the rug. Let's suppose that your annual gross income is $60,000 and that you are looking to purchase a rug for $600 (1% of $60,000). It would be wise to wait at least 24 hours before you make a purchase. Even if your rug is old, you may decide that $600 is too high and you can get a better deal on a new rug.It is a good rule to follow 'for anyone making $200,000 or less.
