The $20 Rule

The $20 rule is that you could lose a $20 bill and not even know it, so let yourself be somewhat cavalier when considering a purchase of $20 or less.

I learned about this rule about a year ago when I revealed to a friend–we’ll call her Emily–that I was waffling over a skinny tie that I wanted. I rarely buy clothes, and I didn’t need a tie, but  I thought it looked awesome. It was about $17.

That’s when Emily told me about the $20 rule. And thus I became the proud owner of a skinny tie.

To be clear, this rule should not devalue a $20 bill. $20 can go a long way. It can feed you for a week if you only eat peanut butter and jelly and cereal. But if you’re at a point in your life when you could lose a $20 bill and not even notice, this rule applies to you.

Here are a few recent applications of the rule for me:

  • A few months ago, a cousin asked me to donate to his Relay for Life run. If a random person I barely knew contacted me, sure, I probably would delete the e-mail. But he’s family, and I donated without a second thought.
  • A month ago, I saw that Bonnie Raitt had a new CD coming out. My parents listened to Raitt a lot when us kids were growing up, so I bought them the CD on the spot.
  • A week ago, a very good friend–we’ll call him Trev–told me that he had heard good things about a book that just came out, and he bought both of us a copy to read and discuss. How cool is that? Amazon even makes this easy by giving you free shipping on orders over $25. The next time you buy a book, buy it twice–once for you, and once for a friend who you know will want to talk about it with you.
  • Just today, a former high school classmate that I barely know launched a Kickstarter campaign for his video game company. I don’t even play video games (other than iPhone/iPad games), but $15 is nothing. I want my former classmates to succeed, all of them. Kickstarter is particularly dangerous for the $20 rule, by the way, but it feels good to go on there every once in a while and chip in a couple of dollars to help someone on their passion project.

Do you ascribe to the $20 rule? Or perhaps do you have your own rule for impulse spending that you abide by?