The 10X Investment Consumption Rule To Fix Bad Spending Habits

Once your housing expense is under control, the next thing to tame is your consumption habits. The most common waste of money today is buying an automobile. New cars are simply too expensive for the median household income. But because car manufacturers have created ways for consumers to stretch with financing and leasing deals, consumers succumb to marketing persuasion and buy cars they cannot comfortably afford.

If consumers follow my 1/10th rule for car buying, almost all of one's financial problems, as it pertains to a car, will go away. If you spend only 10% of your gross income on the current value of a car, you won't sweat paying insurance, paying tickets, or paying for maintenance or damages. At the same time, if you want a $30,000 car, find a way to make $300,000.

If you want a luxury automobile that costs a whopping $100,000, then you best make more than $1 million gross a year!

Now that we have a viable solution for automobile buying, the next bad consumption habit to slay is everything else you don't need i.e. wants. From buying $3,000 Louis Vuitton handbags to spending $9,000 on a Panerai watch, there are a lot of wants that will prevent us from achieving financial freedom sooner, rather than later.

Therefore, to solve this problem of mindless consumption, I've come up with The 10X Investment Consumption Rule

The 10X Investment Consumption Rule

Before I explain to you the rule, let me share a comment from a reader in my post, Here's When You Know You're Not Yet Rich Yet. The post talks about wasting 2.5 hours of my life because I was unwilling to spend an extra $100 to fix my cracked iPhone due to sunk cost fallacy. Nate's comment inspired me to come up with this consumption solution.

Apple continues to be really, really good at social-engineering sheeple to buy their products and services. It has perfected marketing and social engineering. Its users are willing to buy overpriced phones that require overpriced dongles and overpriced support. And even when the users get kicked in the gut, they’ll continue buying Apple over and over again. It’s irrational; it’s also great social engineering that you fell for.

So yes, I am a sheeple for using Apple products. I fell for their marketing and social engineering because I realize their products are so much more expensive than generic PC products. But because their iPhone was so revolutionary when I first got one in 2008 and because Apple built an ecosystem of apps that made their software and hardware easy to use and integrate between a laptop and a mobile phone, I stuck with it.

Unfortunately over this time period, their products seem to be worsening in quality, and their customer support has declined as well. Going to an Apple Store is almost like going to the DMV, a nightmare place.

But after the comment, I realized one of the reasons why I keep buying Apple products is because I've owned Apple stock since 2008 and I love supporting companies I invest in.

Apple Stock History
Owned Apple stock since Aug 22, 2008

Invest In Companies You Use

The first iPhone came out on June 29, 2007 and I was a skeptic. I had been a heavy Blackberry user since 1999 and couldn't fathom a buttonless device being good enough for work correspondence. Some of the e-mails I had to write on my Blackberry were extremely lengthy due to the amount of research analysis I had to provide to my clients.

But after a year passed, I decided to give it a shot. And after a couple months of giving it a shot, I bought $10,000 worth of Apple stock. Over the years I've ended up buying about $100,000 worth of Apple stock that has since provided a healthy return as the stock is near an all-time high. During this time period, my overall net worth increased as well.

I can basically frame my family's Apple product consumption of iPhones, Macbooks, and iPads as free since 2009 + a profit thanks to my returns in Apple stock.

The 10X Investment Consumption Rule simply states that before you buy any product or service you don't need, you must first make an investment return equal to at least 10X the cost of such product or service.

Consumption Example #1: Overpriced Mobile Phone

You want to own the absurdly priced iPhone X for $1,000. To do so, you must first make a $10,000 return on Apple stock. You could also make an investment in Apple's downstream component suppliers as an alternative.

If you follow my rule, you'll need to review your existing liquidity in order to determine how much you can afford to invest. You'll have to do a deep dive net worth allocation overview to see where you are currently exposed. You might even run a cash flow analysis to see how long you need to save before you will come up with the investment capital.

If you can't afford to invest, how can you afford to buy a $1,000 phone? If you've only got $10,000 to invest, you realize that you'll need to return 100% to be able to afford a $1,000 phone. Such a time delay will make you think thrice before buying something you don't need.

But if you have $100,000 to invest, it might be easier for you to make a 10% return to afford a $1,000 phone. And since you have $100,000 to invest in one stock, that must mean you have much more behind, which means you absolutely can afford to splurge.

The goal is to transform from a consumer mindset to an investor mindset.

Consumption Example #2: Basketball Sneakers For Show

You want to own the latest colorways of the Jordan 3, Jordan 4, Jordan 5, and Jordan 6 shoes. The total cost for this box set is $900. Before you waste money on basketball shoes you'll use to just walk around in, you've got to return at least $9,000 in Nike stock.

I swear to goodness, every time I go to a Footlocker or Nike Store when a new Air Jordan retro drops, there are lines out the door filled with teenagers and 20-somethings, the poorest demographic in our country.

By spending hours researching the company that's taking all their money, Air Jordan consumers will understand more about how a business is run. Sometimes, they'll discover some products have a 90% gross profit margin, which makes them stop consuming for not wanting to feel stupid. Other times, they might be inspired to start their own business to capture such profit margin.

The 10X Investment Consumption Rule
Standing in line for the latest retro Jordans

Consumption Example #3: European Vacation

Instead of driving an hour to the beach for just $10 of gas, you just have to fly to Santorini for $1,000. The trip will be fabulous for your Instagram and Facebook profile.

The 10X Investment Consumption rule means that you'll have to make $10,000 in an airline stock like United Airlines (UAL). That's no easy task, especially with oil prices moving higher, but that's the whole point.

By the time you finish researching and investing in your favorite airline stock, you'll understand how to measure available seat miles (ASM), revenue per available seat mile (RASM), cost per available seat mile (CASM), break-even load factor, and earnings sensitivity to a dollar in oil price change.

Or maybe you might want to do research on TripAdvisor (TRIP) to figure out when the slow season is to find the best Santorini deals. After all, you'll also have to spend money on lodging, food, and entertainment.

Related: The Boot: A System To Enable You To Spend Money More Freely

Adopt The Investor Mindset If You Want To Spend

If you can’t get excited about investing in a particular stock after doing your research, the simple solution is to either buy an index fund, a sector index fund, or don’t buy that particular good at all. It’s only logical that if you don’t like the fundamentals of the company, then you shouldn’t be supporting the product.

Having a savings + investing mindset will always ensure that you make enough money before spending. If you can do this, you will never go broke. You will learn patience. You will better appreciate the value of a dollar.

Instead of living paycheck to paycheck, you'll likely grow rich beyond your wildest dreams. Treat your investments like expenses to feel good about spending a lot!

Build More Wealth Through Real Estate

Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile. Real estate provides utility and generates income. If you like to spend money, not only should you follow my 10X investment consumption rule, you should also develop passive real estate income as well.

In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $944,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.

Take a look at my two favorite real estate crowdfunding platforms.

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go. 

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio. 

Invest In Private Growth Companies

If you want to consume, invest!

Consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment. 

Check out the Innovation Fund, which invests in the following five sectors:

  • Artificial Intelligence & Machine Learning
  • Modern Data Infrastructure
  • Development Operations (DevOps)
  • Financial Technology (FinTech)
  • Real Estate & Property Technology (PropTech)

Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!

The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.

Stay On Top Of Your Money

Finally, sign up for Empower, the web’s #1 free wealth management tool to get a better handle on your finances. In addition to better money oversight, run your investments through their award-winning Investment Checkup tool to see exactly how much you are paying in fees. I was paying $1,700 a year in fees I had no idea I was paying.

After you link all your accounts, use their Retirement Planning calculator that pulls your real data to give you as pure an estimation of your financial future as possible using Monte Carlo simulation algorithms.

Personal Capital Retirement Planner Tool

About The Author

86 thoughts on “The 10X Investment Consumption Rule To Fix Bad Spending Habits”

  1. Ten Bucks a Week

    Excellent, so before I buy your book, I must make $850 by investing in your site. How do I go about that?

    1. Ah, You’re mistaken. First of all, the book is only $75 with the promotion code on the page. Second of all, the book is a necessity, not a want.

      When you actually have the potential to make back multiple times the investment, that is an investment! And from many people I’ve talked to, they have done very well.

  2. Robert T Griesmeyer

    Awesome! I recently started adopting your (invest 50% of your income). I wouldn’t have been able to do it without moving out of my “convenient” Mission apartment in SF to Oakland. My rent is half of what it was before and now I can save 50% of my income. I’m on track to buy a house in one year.


  3. Steve (NWOutlier)

    I really like this idea; I’ve had an idea of my own, but yours is better! My idea was if I wanted that ipad or iphone (or anything), I would have to save 5x to 10x the cost into my investments, before the time of purchase. The reason for the spread is; 10x is for electronics cause they become obsolete so quickly and 5x is for any other type of purchase, let’s say furniture.

    Your idea has the investment and the growth built in before you buy the toy or item… I mean it’s tough to do, but wow I think I’m going to try it!…

  4. I might have read this wrong so apologies if I misunderstood, but what is the point of tying your investment to the product you want to purchase? That makes no sense to me. I understand and agree with your investing rule, but why are you not recommending using ANY investment income? If I want an iphone for example, I need 10X the return from a particular investment earmarked for a phone, but the investment has to be with the company that made the phone? Seems way less than optimal for returns. Pick the best investment opportunity and tie that to the purchase makes more sense?

  5. Sam, good article. Would this also means following couple of 3 items; please help figure these:

    A. If you now hold $300K worth of APPLE stock gains, which means, you now have to right to buy $30000 worth of Apple goods ? And, if you only spent $10K out of it thus far, could you repurpose remainder of the $20K AAPL spendable gains on some other items (or restrict to only Tech items) ? Or dump the remainder $20K spendable gains in 529 plan or something ?

    B. Alternately, if you made say $100K in NFLX stock, would it mean, now you have $10K allowed to spend on NetFlix or its gear. How long it would take at $9.99 plan to catch-up to $10K spendable gains ?

    C. You may feel Tesla as a car may be a good one (or not), but you may never want to own TSLA stock over the last 4-5 years. How you reconcile that ? (I know, you have another Car specific limit, assuming the purchase is within those limits/guidelines)


    1. A. I wouldn’t spend more on Apple products just because I’ve made more on Apple stock. The 10X IC rule is a MINIMUM. I would personally keep the money invested and let it compound.

      B. Given Netflix costs $10/month, an awesome 83 years to spend your profits down. Again, keep the money invested. Your Netflix expenditure is good to go.

      C. This one is easy. For all automobile purchases, follow my 1/10th rule for car buying.

  6. Mr. Rational Buck

    Sam, it’s a great rule. I found your 1/10th car buying rule right around the time I borrowed $25,000 for a car…

    You’re correct – buying above your means causes unnecessary stress. Some days I look back and wish I had bought a $2,500 car, while other days I am simply grateful that I have a safe, reliable means of transportation. It was a decision that really made me look at what I was doing with my finances and helped me see that there was a different path than the one I was on.

    Your articles helped me see that, and I am very grateful for that!

  7. I enjoyed reading your initial post on the 1/10 rule for purchasing an automobile. I have resisted buying a new car, even though I make 6 figures, due to your advice. My 2009 Toyota Corolla has 100k miles on it and can keep going for another 150k if I treat it right.

    Here’s my dilemma: My new job gives me a $6k/year car allowance “benefit” that I must use on a car than is less than 8 years old if I want to take advantage of this “privilege”. Obviously, my 2009 Corolla does not meet my new employer’s age qualification and I find myself in the unlucky position of having to shop for a newer vehicle in order to get the “benefit” at all even though my current car is in excellent shape (and I love my Corolla, too). I’d like to get a car that costs me $300/month and pocket the rest of the money, but I’m not sure that I can get a good car for $11,000 (currently 1/10 of my income) that would be presentable enough in the eyes of my employer.

    I’m not sure what I should do. I work in banking and need to have a car that can cosmetically compete with those of my fellow colleagues. They went crazy with the benefit and purchased Jeep SUVs which get terrible reviews no matter the model year. My goal is to stick to the 1/10 rule since I’ll be able to pay for my car in full up front and then pocket the money coming back to me via the “benefit”. I’m not convinced right now that I’ll be able to get something that will get the job done for $11k. I feel forced into a financial tight spot even though this “benefit” is a well-intentioned one on the part of my future employer.

    I need help and advice on the kinds of models I should be looking at, do I buy from a private party, what’s the best way to fit in with my future colleagues without getting overruled by emotion and going out and making the mistake of buying a brand new car. Keep in mind that I’ve only ever driven imports because American-made cars are pieces of poo and do not last as long as those of their Asian competitors. The bad part of my scenario is that most of my colleagues drive American cars (it’s a Red area) even though they are objectively worse purchases versus cars made by Asian manufacturers when factors such as fuel efficiency and price are taken into account.

    1. I would take that $6K, add to the $11K as I’m assuming you make $110,000, and then look for rides in the $17K – $25K range.

      The 2017 Honda Accord Sport is so sweet, and only costs $23K – $24K.

      A YEARLY $6K car benefit is awesome, which is why I think you can go up to a $25K car.

      1. Thanks for the advice! The good part of this annual benefit is that I can pocket the $6k if my car is paid off – I can just take the money and invest it if I want to until I have to buy a new car again. Hope you come out with a guide on how to do your own due diligence on a particular stock soon so I can put my extra cash to work :-)

        1. So…if you buy a 2017 car and apply $6k from the first year to your purchase, you’ll collect $6k for the next six years until you hit the eight year age limit. That’s $36k towards your next car seven years from now. Sweeeet!

  8. Damn Millennial

    Fun way to think about things.

    It is boring to write about investing more, spending less, and using proceeds down the road to support the life you want.

    I will dive into the fun. I want to invest in car companies until I 10X a Porsche. Then I want to game the cheapest way to own them and work on trading up until I get a 911 turbo!

      1. Damn Millennial

        Agreed! Would love to rent it in your neck of the woods and drive all the way down to socal.

  9. My first thought is “Well nobodies gonna give me that much money to invest anyways. My boss ain’t gonna train me to be that valuable to him, and he wouldn’t give me the profits anyways even if I was.”

    What do I need to know or do to go from where I am to become the kind of person that can get 10X investment returns in their chocolate stocks?


  10. Adam and Jane

    Rules? We don’t need no stinkin’ rules! LOL!!!

    That 1/10 rule for a car is tough. At age 23, I bought a new MB in the late 80’s for 27K before sales tax and I was making 28K. Back then, the avg car was 15-16K. It was a spurge but I loved and enjoyed driving my first new car for 20 years.

    My current american car is 19 years old and it cost 27K before sales tax in the late 90’s. Our combined income was 150K which is about 1/5 ratio.

    I failed your 1/10 rule for both cars but I do understand your test for affordability.

    I have no money in the stock market so I don’t have any Apple stocks. I wished I bought some when it was under $100 a share in 2016. Between my wife and I, we have 2 IPAD Minis, two 12.9” IPAD Pros, and one Iphone 7 which cost $2,850. I would love to make 10X $28,500 from Apple stocks.

    Rules may be good for someone younger to save money like not blowing so much money on your first new car out of college. My mother-in-law was not happy when my wife put down 30K more than me on the purchase of our house. Ah, my 30K went into my first new car which is used to drive to visit her. HELLO! It took years to redeem myself to her but that is another story.

    We will be 54/53 this year. At this stage of life, we have no need to follow rules as long as we are spending less than our passive incomes (from munis and wife’s pension) which currently covers 2X expenses. Now, I keep telling my wife to buy whatever she wants since there is no need for us to accumulate any more.

    Here are our simple rules for retirement and for consumption:
    After we were married, we keep our finances simple. We basically save a min 50% of our incomes, max out our 401Ks, strive for a min of one million dollars by age 55 for each 401K acct, savings in CDs, pay down the mortgage and stay in the same company for 30+ years to each get a pension & retiree medical at age 55. Buy what you need and don’t be wasteful. We were very wasteful from 1991 to 2009.

    Due to fears of layoffs, we only started buying NY muni bonds since 2010 to generate tax free income in case we lose our jobs. Our muni bonds will generate 90K Federal and State tax free this year. Next year it will generate 94K tax free. My wife’s pension is 52K before taxes.

    I am fortunate that my pension will double to 71.5K and will get 8K yearly for retiree medical in 16 months at age 55. At that time, I will be eligible to retire.

    At age 62, our passive income from munis, both pensions, 401Ks interest and SS will cover 4X current expenses. My plan is ZERO SWR and to live off bond & 401K interest, pensions and SS to preserve principal.

    I get that the point of the post is to invest, generate passive income to afford your purchases. It would be crazy to invest in each company for each item or for the luxury items you purchased. That would take too much time to manage. I rather just keep it simple by investing in the Vanguard S&P 500 Index fund.

    We try to live by the “Simplify your life” motto!


  11. Charleston.C

    Isn’t that an awfully complicated way to basically say one should not buy luxury goods and services unless one can comfortably invest significant sum in the company?

    If we were to take that logic one step further, why not have a general rule from a budgetary standpoint where one should not spend more than 1/10th of net gains from post tax investments on luxury goods and services? Would make a lot more sense for someone to buy a Tesla for $100,000, if he or she can generate $1,000,000 in profit from an oil company or other investment, vs trying to gamble with Tesla Stock right?

      1. Charleston.C

        Follow the same chart for how rich one feels based on networth and income.

        I am not as seasoned as an investor as you are, but picking an choosing companies to invest in, based on products we love just doesn’t seem right.

        Tesla being one example; investing in offshore drilling because I like to drive may not be a good idea; GM, Kodak, and Remington both filed for bankruptcy protection even though I like their products.

          1. Charleston.C

            Unless you are cashing out of Tesla now after invested for 5 years, only time will tell if its actually a good purchase. Meanwhile I furnished my garage with tools from Sears. Had I followed the 10x investment consumption rule, I’ll be giving tools back to Sears.

            I’m all for investing more, consuming less. All of your regular readers feels the same way. But to use one of my favorite quote from the movie Scarface: Don’t get high on your own supply. I think I’ll continue to separate investments from leisure.

  12. Love the concept of this rule but question how robust it may be in practice.

    For me personally if I owned x10 Apple stock, I would be well overweight in that position and other consumer product companies. I’m not sure that’s prudent?

    I may also suggest in a bear market that’s gonna be a tough rule to stick too. In fact, good deals are to be had on consumer products in a slowing economy when investment markets are lower.

    “It’s only logical that if you don’t like the fundamentals of the company, then you shouldn’t be supporting the product”

    Why is this so? I may love a companies products as a emotional preference but want to detach emotions from my investment decisions.

    Still I do moderately agree with the post. It’s great to be more involved with a likeable business that has great products and investment returns. Isn’t that what Peter Lynch said?

    1. You wouldn’t be as overweight Apple stock because you would have realized you were too overweight long ago to be overweight. It’s up to you and your investing style.

  13. I am going to Santorini in 3 weeks! We are going to Portugal and Greece actually. The trip is going to cost us 22k total. So what airline is going to give me 220k in returns!! :D

    1. Enjoy! Hopefully the flights didn’t cost $22K total.

      Santorini is where I had my epiphany moment to negotiate a severance and work on FS full-time starting in 2012. A special place in my heart!

  14. I am not sure “things” should be valued the same as “life experiences.” No one needs a fancy watch. However, traveling to new places does add value to one’s life. It can create better global citizens and a less insular society.

  15. I like this idea. I think I will try it. On the 1/10 car. I probably are more in line with the 1/5 car rule, but we drive our vehicles into the ground. When my wife retires, we will get rid of one car and only use one car for transportation.

  16. I can’t believe your timing on these articles Sam. I was just looking at my dream car on craigslist today for 8.5% of my yearly income and I decided it was a good deal. Haven’t bought it yet though, maybe I won’t anyhow.

    Any particular reason that you have the expense related to a certain type of stock? In your plane ticket/airplane company earnings example, would it really be so bad to make 10,000$ on an REIT and then spend 1k of it to fly somewhere? Just curious why that same useage relationship should hold, especially since I feel like airlines are not going to outpace many other investment strategies this year, and I would like to travel somewhere.

    1. I think it’s beneficial for consumers to research what goes into making a product, its costs, and so forth. I don’t like to co-mingle funds b/c that’s when we tend to cheat. And when we cheat, we create economic leakage that zaps us of wealth over time.

      Get deep and smart about individual topics and items. It helps at cocktail parties.

  17. I prefer a producer + investor mindset, im not the type to pinch every penny (i was when i was broke) instead i aim to produce more in the world so i receive more then i can actually spend, therefore the more i make the more i save since my spending habits stay relatively the same.

  18. As said by other commenters there are some great things with this 10x rule. I think that others are getting lost in the “invest in Apple stock to buy an Iphone” thought. It’s actually a great place to start changing your mindset from a consumer to a owner/investor.

    By researching the company whose product that I’m considering to buy, I’m increasing my overall education and hopefully making smarter decisions. This will allow me to become a better investor overall, and as said in your article, might inspire me to start my own business.

    Also through my research it can help me realize if I should invest in this company or if there is an alternative. If we can live the 10x rule then we also have a very healthy cushion for unexpected investment, or have some dry powder to invest when the opportunity comes.

    I also think that many individuals who are focused on FIRE feel some guilt when purchasing certain items. This gives them a way to purchase that luxury guilt free!

  19. Sam, long time reader (5+ years) but this is the 1st time I have commented. Favorite posts 1/10th rule for buying a car, the 30/30/3 principle, and the net worth rule for car buying (can you tell I am a car guy!!??). Those articles, along with many of your others, have really grounded me in the reality of the things it takes to achieve financial independence. So, thank you 1000 time over for that.

    However, I must disagree with the logic of this article. It is simply too unrealistic for just about anyone (even you). Sure – you can bring up your iPhone story to show how you do it but there HAS to be some products you use and even are slight luxuries that you don’t do this for. Not sure if you dig coffee but let’s say you like Starbucks – does that mean someone who enjoys a $2 drip coffee every day (or even a $1 Keurig) need to get $20 in return (or $10) every single day in a coffee stock or a related investment (i.e. – nearly $8,000 a year) for each minor indulgence)? Probably not your intent.

    I suppose the biggest reason I disagree with the premise is similar to the points have raised in their comments to this article. It leads to less diversification than is naturally optimal (and therefore increases an investor’s idiosyncratic risk).

    Your response might be ‘but I am just trying to get people to focus on being investors and not consumers’. I applaud it! However, this article seems off base even with that premise. Sometimes you appear to go over the top to get people to pay attention. I suggest you stop doing that and continue giving sound, action based advice that people can relate to and realistically achieve (this is coming from a car guy wants $150k Porsche 911 Targa 4S but has postponed the purchase because of some of the important things you have written over the years).

    * P.S. – regardless of my opinion on this article, overall, I think you are doing an amazing thing with this blog! Keep it up!

    1. Glad this article got you out to comment after all these years!

      The only thing that limits your diversification is your mind. There are literally thousands of publicly traded companies to invest in, and hundreds in each sector to choose from. And if you don’t like the company, you can invest in a sector ETF.

      The coffee example is PERFECT for the 10X Investment Consumption Rule. We all know that coffee is neutral to bad for you. We also know many companies provide their employees with FREE in-house coffee. Yet employees are willing to stand in line to spend $3-6 on a Starbucks coffee. Multiply that amount by the # of work days in a year, and add up all the time wasted going to a coffee shop. What a waste.

      But of course, we all know that employees love wasting time at work. Nobody works a full day. But that’s beside the point. The point is: drink water.

      Why is returning $8,000 on a stock a year considered unreasonable? Have you seen Starbuck’s stock chart history? I am constantly surprised at how so many people DO NOT BELIEVE in the returns people are making or the money they are making from their job or business.

      It’s the same thing with people not believing they deserve a raise, or that they can negotiate a severance, or that they can achieve financial independence. But your feedback is excellent for a future topic. And I do wonder whether I should get more Instagram-like and highlight more specific returns and fabulous lifestyles to make people believe. It’s not my way due to Stealth Wealth, but it might help on occasion.

      I leave you with great advice, since this is what you want: Buy the $150K Porsche Targa 4S! You only live once. After you buy it, please write a guest post or at least comment about your purchase experience. It’ll be awesome!

      Related: Do You Have The Right Money Mindset To Get Rich?



      1. Doctor Nancy

        The best investment advice is one that is agreeable. Any advice that makes things more difficult and that requires change is hard.

  20. Another great principle is what Peter Lynch suggested “Invest in what you know”. He would literally look through his wifes check book entries to see what companies his wife was spending money with. It goes down the similar line of the Apple story, yours obviously makes the point of is it wise to spend money on Apple.

  21. Simple Money Man

    If people want to throw down thousands for an iPhone, let em, my AAPL will continue to go up. :-)

    I still have the 6 from a couple years ago. It works just fine (although the battery charge drops faster than normal). It’ll still be a lot cheaper for me to change the battery out rather than “upgrade”.

    As far as the 10x rule goes, that would be tough for some things. If you need a pair of running shoes, cause you’re old ones are starting to fall apart and the cheapest yet nicest you can find are $39.99, you may not be able to wait for your investment to yield $400. I guess at this point, it may be a necessity instead of discretionary?

    1. If you need a new pair of running shoes b/c the old one starts falling apart, that is indeed a NEED. Hence, buy the best running shoe you can. Why skimp on your tires.

  22. I have to check check double check that all financial plans are on estimates or exceeding before spending ridiculous amounts on pure luxuries like that (never would anyway). No new car before I owned a house. One new car lasted me 28 years. Bought a new one last year for $29,000. which will last even longer. That car would not be sitting in my garage if I did not own a really nice house, have a really nice income, and a growing portfolio and net worth. My luxuries are more considered. Spa, hair, specs, are musts. No expensive watches or purses or gold jewellery. I have a lot of nice antique and vintage furniture, but not big on appliances and gadgets. I do need new mattresses all round which is on the list for my move to bigger premises. I have 100% linen sheets and towels though. I also have a couple of Mac laptops and a great smart phone, which I use constantly. My audio-visual equipment is pretty old.

    I realize that you are joking about owning stock in things you like or use. I found that to be a poor way to make investments but the point is to understand a stock enough to know what factors will raise or lower the MV and why a stock went up or down. I don’t buy on Amazon (got what I need already) but I own the stock. Would not eat at McD but have owned the stock. Use gas and electricity but do not own utility stocks.

    The concept is good, some people need a check on their spending as they need immediate reward. I’d rather wait and know what I want for sure, rather than aimlessly spending wildly and not even using what I buy. I have to make sure I can afford it without deviating from plan. Hate to pay tickets and waste money on taxis, but of course I do, and I can afford it without blinking.

  23. Now that I’m close to achieving financial independence, I’ve noticed that I’ve started to view my spending in terms of how much net worth it would take to sustain that level of spending assuming a 3% “withdrawal” rate. So, buying a $1k iphone every 2 years would require ~21k of additional net worth for example (factoring in taxes). I actually felt wealthier when I was younger. Back then, there was a 1:1 relationship between my savings and spending potential. So $1k in savings would’ve been enough to justify the iphone.

    Your idea of tying spending to buying specific stocks is interesting. In retrospect, the best investment advice I could’ve given myself would’ve been to buy stock in the companies whose products I use. At this point, I just invest in index funds though.

    1. I like it! Keeps you motivated to not splurge and to build net worth.

      Saving $1K to spend $1K is better than spending $1K on a credit card b/c you don’t have $1K. But when most people think it’s OK to spend $1K after saving $1K, they won’t get very far towards FI.

  24. “From buying $3,000 Louis Vuitton handbags to spending $9,000 on a Panerai watch”

    Are you in my closet right now?

      1. Wife owns a LV bag. I own a Panerai PAM111. The old sandwich dial Luminor model.

        I love it, though I know it’s a terrible investment. I’ll give it to my kid when I die.

  25. We do a variation of this rule with my daughter but we call it lost opportunity cost.

    She wanted the new IPhone X and had the money to buy it. Before she did I made her input the difference in price between the X and the 8 which at the time was $400 into a simple compounding calculator. $400 compounding over 47 years “ she’s 18” at 10 percent per year would cost her $46,000 in lost opportunity cost.

    She ended up buying the 8 and put the $400 difference into her Roth.

    We’ve been doing this for years and she just passed the 8k mark in her Roth.

    It’s difficult for her to appreciate this at her age but I’m betting she will be extremely grateful as she gets older.

    Thanks, Bill

  26. Very creative! I love your 1/10th car buying rule and this is a clever way to help curb unnecessary spending and to get motivated to invest more. Nice job on your Apple and Netflix investments!

  27. Sam, not sure if I understand your logic here. Why would I invest $100k to get a return of $10k a year to afford a $1k phone that I don’t replace every year? That seems way too much of an investment to afford one item. If you keep on doing that for all of your expenses, then you are talking about millions of dollars of investment. Sure, if someone’s already FI then they are practically doing that and living off of their investments. But for someone who is on their way to FI, it seems like an overkill and almost impractical.

    Why not use the logic of just investing enough to be able to afford the item? If I replace my phone every 3 years, I need a return of $350 a year to be able to afford a $1000 phone at the end of 3 years. That’s an investment of $5000 which at 7% return will yield $350 a year on average over a longer period. That seems more practical for a working individual than having to come up with $100k!

    You keep doing this for everything you spend on (cell service, Netflix, Prime, etc.) and eventually you are leaving your principal as is and spending just from the returns all while you are on your way to FI with that and other routine larger savings and investments.

    1. Sure. The answer is to come up with various permutations to get a 10X return. The whole point is to develop an investor mindset, which goes beyond returns.

      Let’s say you invested $100,000 in Apple stock in 2008, you would be up more $700,000. People can call you a sheeple for buying their products as they are overpriced, but under my rule, you’re able to buy $70,000 worth of Apple products if you want. In other words, at some point, you should be able to buy Anything you want because you’ve earned it.

      I don’t believe in shooting for the bare minimum.

      BTW: how about NFLX this year? Whoo hoo! My family is able to afford watching Netflix for a very, very long time :-)

      Check out the podcast at the end to hear more nuance.

  28. This is great Sam. I love how your site is focused on finding ways to buy “luxury” items instead of not buying them at all. We all want to enjoy some of the finer things once in a while. Investing enough to support those luxuries is a great way to find balance.

  29. I like this rule, but it’s probably unrealistic for most people. Maybe if we limit it to unneeded luxury brands.
    We just spent about $900 on a new mattress, but I’m not going invest in that company.
    The 10x car rule is much easier to implement.

    1. Well, if you look at the retirement savings for American households, the majority don’t have nearly enough.

      But just imagine, if the majority got into the investor mindset and invested before spending. Society would change for the better. People would be less stressed and much happier.

      I’m not sure if $900 is considered a lot or not for a mattress btw. I see a high quality mattress as one of the top necessities in life!

      1. I think $900 is midrange. But it just really depends what you like. We got a latex mattress. I like it much better than memory foam.

      2. “…But just imagine, if the majority got into the investor mindset and invested before spending. Society would change for the better. People would be less stressed and much happier.”

        Society might change for the better but without all that consumption I think our economy would go into a tailspin.

        OTOH, each $1 I’ve invested in AAPL has returned $85 (not including profits foolishly I took along the way). I assume it means I may buy an Apple product any time I want?

      3. “…But just imagine, if the majority got into the investor mindset and invested before spending. Society would change for the better. People would be less stressed and much happier.”

        I think that Apple stock would cost then only 20, but not 190.

        And thats one thing, another thing is that it would drain money from what would go for improving society. Better technology, better equipment, better healthcare and so on and on and on. I have lived in Soviet Union and i know one thing – to get better life in the future you need to invest and spend. When i read western media i see so much communism. Even when they think that its not communism.
        Believe me, it doesnt work. No, you need to be thirsty. So if you want that Mercedes (i dont have mercedes, i have toyota), buy it and then work harder. People bought PC-s when these cost 5000, but because of them computers cost lot less nowadays. Same thing is if you buy german luxury car today, these are full of newest technology. And because people buy these cars then these features can be soon available for basic cars.

  30. I like the premise but at this rate I will never get those Jordans. How much would I need to invest today to see a $900 return? I do agree though, finding ways to minimize consumption will speed your way to riches.

    1. That’s the point. If you’re a 20 something-year-old kid who lives in your mom’s basement lining up for hours to spend $900 on a box set, that is wrong. The 10 X investment consumption rule will simply prohibit you to buy the product.

      Or at least, you can just spend $190 for one pair, instead of buying four pairs. It’s much easier to return $1,900 than $9,000.

      By the way, I think you emailed me because you double paid or use the wrong account for my book? If so, let me know if there needs to be a resolution.

  31. I like this rule for a lot of luxuries (vacations, fancy dinners, accessories, etc.), but applying it to a phone seems harsh. An iPhone X probably qualifies, but even then I’d just count the marginal price (e.g. $1,000 minus the cost of an avg phone) as the luxury.

    I can’t invest in individual stocks either, but I try to apply a similar constraint on my spending with extra billable hours / bonus pay. Lot’s of others can do the same with overtime. If you want to spend $100 outside you budget, then sign up for an extra shift to make that $100 (or $1,000 by your rule) in extra income. It’s funny how much less I want to go to Santorini when the alternative is to work 100 fewer hours and go to my pool instead :)

    1. BINGO! Once you have to work for your money, or work harder for your money by Counting the amount of time you need to spend, spending becomes much harder.

      The 10X Investment consumption rule instills patience.

  32. Just bought our first new car ever. 28% of gross income, oops.

    Definitely more than I wanted to spend, but got what we wanted for our lifestyle and interests.

    Based upon normal use, should easily last 15-17 years, so to me that’s how I’m justifying it LOL.

  33. I realize this is tongue-in-cheek to prove a point… but this is a bit insane.

    If you’re killing yourself to earn $250k+/yr you should take your European vacations, man. Now, don’t be an idiot and outlive your class. Maybe fly coach and hunt for airbnb deals, but Cole on enjoy your life. Eat good food. Stuff like clothing and accessories… yeah I can’t justify that one.

    I worry people will listen to this if it goes viral. Careful with your platform, buddy…

    1. Don’t worry, this post makes too much sense to go viral.

      There is no mention of income in this post at all. I’m focused on changing people’s consumption habits and turning them into Investors rather than consumers.

      Are you saying that if one is up over $100,000 on Apple stock, it’s OK to buy Apple products? Or are they still considered sheeple?

      1. Yep. Controversy certainly attracts attention, and this one isn’t all that controversial as long as you don’t limit the spending to the same company or industry, which you already covered.

        I definitely find this an interesting concept for the spending and investing. My main takeaway from it was: “If you can’t get excited about investing in a particular stock after doing your research, the simple solution is to either buy an index fund, a sector index fund, or don’t buy that particular good at all. It’s only logical that if you don’t like the fundamentals of the company, then you shouldn’t be supporting the product.”

        I totally agree. I don’t always support the companies of products I purchase, and I often find myself making doantions to offset the damage of negative products I buy (e.g. gas, unhealthful foods, consumer-unfriendly companies).

        For myself, I’m adjusting your 10X rule to be:
        The 10X Investment Consumption Rule simply states that before you buy any product or service you don’t need, you must first make an investment return equal to at least 10X the cost of such product or service, or in another product to offset the damage.

        I would also want to add the converse to the rule:
        If you invest in a product you don’t like, you need to spend (or invest) at least 0.1X to offset the damage of the product.

        So considering how much I’ve already invested in Apple due to broad-market ETFs, that’s a lot more Android or Microsoft products I’d need to buy :D

    2. I have to agree with MrB. Life has to be all about balance. I recently spent $100k on an around the world trip with my wife. It will likely be one of the most memorable and best experiences of my life. It will be where I go mentally to find peace on my death bed someday. But, I also maxed my SEP IRA already for this year. Investing is about discipline for sure. But life is about living. This is way too restrictive to live a happy life. Also, the iPhone example is a terrible one. I use my iPhone more than any other device on earth. More than my car, computer, microwave, etc. If there is anything in the modern world worth splurging on it is a nice mobile phone. :) I wish Apple would just put my credit card on file and send me the latest phone the day it releases!

      With that said, the post is a great topic. I’m just not sure about the proposed solution. At the risk of sounding like a complete jerk, I’m not driving a $30k car if I make $300k a year. $30k doesn’t get you a great car these days and likely not a very safe one. I personally would be perfectly happy driving a $30k jeep. But, I’m not putting my wife in an unsafe car when I can comfortably afford to have her drive a tank. This would be even more true if I had kids. What’s the value of money without someone to share it with. I understand you can use this logic to justify crazy spending, but these types of factors do have to be considered at least to a point.

      1. That’s awesome you guys can afford a $100K trip around the world. How long did it take? What was your mode of transportation?

        One of my favorite cars is the Honda Accord Sport 2016-2017. Looks great and only costs $24K. There are so many great cars for under $30K.

        Why do you think the commenter was so against me buying Apple products despite my investment returns, not counting income and net worth?

    3. GirlOnAMission

      I’d have to 3rd MrB. My husband and I were not born into wealth and have worked very hard to get where we are now, including working full time while attending school so we would not have school debt. We are currently debt free (besides for our mortgage which we pay extra towards) and both max out of 401k. We both have separate small investment portfolios and still manage to save some money for fun or house updates by not keeping up with the latest technology, hardly going out to eat, and only doing one trip per year (not including camping.) I like your rule of thumb but for us we just simply can’t afford to invest that much just for us to enjoy a break. Mental health and a work/life balance is important; even while trying to make enough to retire early. As I hope our income increases through the years, this is something we will revisit. Thanks for always keeping us motivated and knowledgeable through your blog!

  34. FullTimeFinance

    Biggest flaw in my opinion is needing to invest in a related stock. Some of
    These like airlines I wouldn’t invest your money in given their history. That being said otherwise concept is sound.

    1. You can buy many other types of Stocks related to the transportation industry. I highlighted trip advisor is another stock, but the point is to get into it an Investor mindset.

      You can buy an index fund, like the S&P 500 or you can buy a travel sector index fund and try and make 10X too.

      I wonder how warren buffet’s airlines investments are doing.

  35. I think it is a great rule but would shy away from making the requirement that I have to own individual stock in a company I plan to buy the product in. Think that could overall be a risky move (for example I want to buy a 500 dollar toy a couple of years ago. Did I really want to have 5k in Toys r us stock? A better way would be to give a proportion of your total passive income return over all assets. So if I am bringing in 50k yr in passive income I am allowed to have 5k to spend anyway I see fit (doesn’t have to be in one item but spread out through the year).

    Being heavily weighted in a particular stock just because you are buying that product could make for a double mistake (buying an expensive item and concentrating risk on the company that makes it). It worked for you because you were lucky with apple and the timing but who knows if there is a compamy that will be created in future that will be a major disruptor like Amazon and its effect on the blue chip retail stores.

    1. One of the beautiful things about this rule is loss. You have to learn to lose in your investments to win long term. The investor who thinks s/he is a genius because all they’ve seen is a bull market is in a precarious situation.

      Losing makes you value money more.

  36. Wealthy Content

    Very interesting perspective, really like it and will try it to see if it is easily applicable. The investing mindset probably does not get enough press compared to frugality etc.

  37. I love it Sam, great rule. Although I don’t buy individual stocks so I wouldn’t be able to play. That’s okay, I’m already financially independent plus lots of extra :)

    The most common waste of money today is buying an automobile.

    And thanks for reminding your readers of this. It’s so true. And America is such a car-obsessed culture, this one truth holds back millions of Americans from better finances and keeps them working so much longer.

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