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?

10 thoughts on “The $20 Rule”

  1. I like this rule since I have a proud recipient of the Bonnie Rait CD, yes we still enjoy playing a CD. However could the same be true for $20 of lottery tickets and then getting hooked? Could this rule be a slippery slope?

  2. I like this rule, and use a variation of it, by having a portion of every paycheck deposited into a separate bank account, which I only use for impulse purchases.

    I did hear a great way of being able to pay it forward with $20 on my drive this morning- a local man regularly prepays $20 at a gas station when he is there so the next person to use the pump has a nice surprise. Hopefully whoever is the recipient of the “free” gas money will be able to continue the trend, and possibly be able to help someone who may not really have the means to be spending the money.

    • I think Katy’s method somewhat answers MS’s concern. Sure, spending $20 on a whim could get out of hand. But if you have some sort of structure in place–or you keep an eye on your budget–it shouldn’t be an issue. If you’re someone who goes shopping a lot, you might need a lot more structure than someone like me.

      Katy, that’s an interesting act of kindness by the man who prepays for other people’s gas. I wonder how many people pay it forward. I imagine that most people are overjoyed that they got some free gas. Like, at least for me, when I discover that the parking meter where my car is parked already has time on it, I view it as a lucky freebie–I don’t put money in it when I leave so other people can have the same gift. Perhaps I’m uniquely greedy in that way.

      • I’m a friend of Gilmore’s (he tipped me on to your blog) and have to share a funny “pay it forward” moment my sister had at Starbucks.

        While going through the drive-thru for just a coffee, the window cashier told her that the person in front of her had covered the cost of her drink. And that this “pay it forward” moment had been going on for about 30 minutes already. She asked my sister if she wanted to pay for the drink behind her. My sister agreed and then ended up getting charged about $5 more than what her drink would have cost her because the person behind her bought some fancy drink. So… this doesn’t always work out well (unless you’re the person who gets a free fancy coffee drink!).

        • Elaine–Thanks for dropping by! I guess “pay it forward” doesn’t work when you have two drive-thru windows, because the person in front of you could order whatever they want, and you have to foot the bill (well, you don’t HAVE to, but you probably feel social pressure to do so).

      • If I did something like that old man, I would hope that others can continue on with the random act of kindness, if they can.

        With the parking meter thing I think that’s understandable as you don’t know if anyone would even benefit from you putting another quarter in when you leave, and I’ve always treated it as just a lucky freebie too when I’ve encountered that situation.

    • Also, if the expectation becomes that everyone pays it forward (like Elaine’s example) there’s no sense of charity.
      Back to the $20 rule though, at the end of the month, it’s worth the $20 for me to not risk pulling from an overdraft account to feed the whim.

    • Definitely, TB. It’s not something you can apply every day and still come out on top. But on occasion? It works out quite well.


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