Are you an impulse shopper? Try the 1% rule to spend less

This story is part of CNBC’s Make It One-Minute Money Hacks series, which provides easy, straightforward tips and tricks to help you understand your finances and take control of your money.

Spontaneously buying what you have not planned to buy can be both fun and emotionally satisfying. But that emotional rush can be fleeting, leaving you with unbudgeted purchases that you do not really need or use.

If you’re struggling to keep your impulse purchases under control, try the 1% money spend rule, which aims to minimize larger impulse purchases that you may regret.

The rule comes from Glen James, host of the Australian finance podcast, My Millennial Money.

The way it works is simple: if what you want to buy is more than 1% of your annual gross income, you have to wait a day before buying it. This rule applies to discretionary expenses, to things you want but do not need, such as new sneakers or the latest gaming console.

Say you want to sell a PS5 for $ 800. If you make $ 50,000 a year, it would be a 1% cap of $ 500. In that case, you have to wait a day before making the purchase.

The 24-hour cooling-off period gives time to rethink the purchase. If you really want it, what harm is there then to take an extra day to think about whether you really need it?

The 1% rule works best if you make less than $ 200,000, and your debt payments are already manageable, according to James. And if a 1% cap feels too high, you can limit yourself to half a percent or a quarter percent instead.

Whatever limit you choose, have a pre-determined idea of ​​how much you can spend before you shop. If the rule helps you avoid an impulse purchase – even once – you would save up to 1% of your income.

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