The 0.1% Rule: Why We No Longer Fight About Money

Like most couples, my wife and I used to fight about money. Either I was complaining about her spending, or she was complaining about my spending. Actually, I used to do more of the complaining, but marriages are about equality, so who’s counting, right?

But that was a long, long time ago. Now, my wife and I think it’s ridiculous when we see or hear other couples fight about money. Don’t get me wrong – we fight about a lot of things. Just not money. Actually, let me correct that. My wife yells at me a lot. Then I grovel and apologize. Is it still called fighting when one side utterly and completely surrenders?

dog fight about money
I’ve tried the puppy dog face on my wife. It works for pets. It works for children. It does not work for grown-ass men.

Why We No Longer Fight About Money

According to this article, between 33% and 45% of couples say the biggest source of conflict in their relationships involves money. Think about that for a second. There’s an infinite number of things that couples can fight about. Like infidelity (not me), chores, parenting styles, personal hygiene, leaving the toilet seat up, etc. Yet the biggest source of conflict has something to do with money. That really highlights where everybody’s priorities lie.

The 0.1% Rule

Like I was saying before, my wife and I haven’t had an argument about money in ages, and hopefully it’ll stay that way. Our secret to being finance-argument free boils down to three reasons:

  1. We’re both frugal. It helps a lot that we’re on the same page. That’s not to say that we don’t have disagreements about money. She likes spending money on clothes and shoes (so cliche), even though I think it’s frivolous.
  2. We’re fairly well off. Obviously, if you’re living paycheck to paycheck, you’re probably going to have a lot more fights about money. If you are living paycheck to paycheck, think about getting a side gig, going back to school, saving with coupons, or ditching your cable bill.  
  3. The 0.1% rule. Basically, neither of us needs to get approval for purchases under 0.1% of our net worth.

Let’s assume you have a net worth of $100k. 0.1% of $100k is $100, so you and your spouse don’t need to get approval for any purchase under $100. If you have a net worth of $1,000,000, you don’t need to get approval for any purchase under $1,000. If you have a net worth of $10,000,000, maybe you should be giving me advice instead of the other away around.

Spending Grows With Net Worth

The beauty of this rule is your ability to spend increases as your net worth increases, so you don’t feel like you’re denying yourself the ability to splurge when your wealth grows. Second, it gives you more incentive to increase your net worth. The higher your net worth, the larger your purchases can be without getting approval, like expensive shoes, video games, or a new set of golf clubs.

But the best part of this rule is that spending at this level is sufficiently low enough so as to not impact your ability to grow your net worth, assuming you’re somewhat responsible with money.

The 0.1% Rule in Action

Again, my wife and I are both generally frugal. But I have my hobbies that my wife thinks are stupid, and vice versa. This rule lets us make purchases that matter to each of us separately, without starting an argument.

Let’s use the example of a couple with a net worth of $100k, with 50% of their money in cash, and 50% in stocks. If each person were to make a 0.1% rule purchase each month, they would each spend $1,200 a year, or $2,400 in total. 2.4% of your net worth sounds significant, but remember, your money GROWS. Current online savings accounts offer rates as high as 1.5% right now, so the $50k in cash would earn $750 a year. The stock market has returned around 11% over the past 30 years. But let’s be conservative and assume a 6% return. This means your brokerage account should earn around $3,000 annually. In total, your net worth should increase by $3,750, over 50% more than the $2,400 you’re spending on discretionary purchases.

Restraint is Key

This will only work if both people are responsible about spending. If one person or both people are hitting the 0.1% cap every week, you’re spending well beyond your means. 52 x 0.1% equals 5.2%. If both people are spending this much, you’re spending over 10% of your net income! But let’s be honest: if you’re spending this much on discretionary purchases, you probably don’t have much net worth to begin with, and there’s nothing that’s going to save this type of couple from arguing about money.

What If I Have No Net Worth?

The 0.1% rule only works if you have a positive net worth, because 0.1% of $0 is still $0. If you only have a net worth of $10,000, 0.1% means you can only make purchases of $10 without getting approval.

It sounds ridiculous that you would need to get approval from your significant other for any purchase over $10, but the rule doesn’t mean you can’t spend more than $10. It just means that you need to make sure you’re both on the same page for purchases over this amount, or else you could be putting your net worth at risk.

How about the 0.0% Rule?

Obviously, the less money you spend, the better. Your net worth is definitely going to increase more if you follow the 0.0% rule. However, the point of having money is for a) financial freedom, and b) to enjoy life.

If you want to be happy, you need to have both. Also, think of this spending as  a cheaper alternative to divorce. According to this article, the average cost of a contested divorce is $15,000-30,000. That doesn’t include the higher cost of living when you’re no longer sharing a home, and losing half your net worth to your spouse. When you compare it to a potential divorce, maybe spending some of that net worth to avoid arguments isn’t such a bad idea?

18 Replies to “The 0.1% Rule: Why We No Longer Fight About Money”

  1. I think the secret here is that you are both frugal. I personally wouldn’t recommend this and there is no way my wife would ever all me the freedom to spend that amount of money without approval.

    Personally, the way we have avoided money fights is by agreeing every single month how we want to spend our money in alignment with our overall goals and values. We also get a little “mad money” that we can use with no questions asked.

    My favorite thing about personal finance though is this: it’s personal! I’m glad you guys have found something that works well for you!

    1. Thanks for the comment. Remember, the 0.1% rule isn’t what you should spend. It’s what you CAN spend without impacting your net worth.

  2. Interesting post. While I understand where you are coming from, I don’t agree with this formula. This approach would mean we set a weekly no-questions-asked limit of $3000 for our kind of net worth! We sometimes live an entire month on that money. We believe in absolute limits rather than relative limits, and don’t like to tie net worth as an anchor for setting these limits. We have $100 a month NQA policy for each spouse per purchase with $300 total per month . About 10 years ago, we started with $50 per purchase (and $150 per month). A couple of years ago, we did an ad hoc bump to $100….as $50 ain’t worth what it used to be!

    I agree with larger principle though – there are sensible ways to avoid arguing about money between spouses by setting an NQA limit. Setting this would probably eliminate over 90% of money fights.

    1. Thanks for the comment. The 0.1% rule may not be for everyone, but it does show that as your net worth increases, you can make larger purchases without significantly impacting your ability to save.

  3. Really? I can’t say that I’d agree with a % of net worth (and at a minimum not including a time frame – per month?). Net worth includes to many variables that I wouldn’t want to touch – live in a million dollar house (that you can’t afford and you’d be fighting all the time or that has appreciated but your income hasn’t as much) – net worth may be there but income isn’t. Seems like a % of monthly savings, salary, or just a set amount would be a better way to go.

    1. Thanks for your comment Wade. I actually mentioned this above, but in the current rate environment and historical returns in the equities market, you and your significant other can make monthly purchases of 0.1% without impacting your ability to increase your net worth.

      % of salary doesn’t work because if you live paycheck to paycheck, you’re in no position to make discretionary purchases. % of monthly savings could work. The issue is if you saved the same amount every month, you ability to splurge doesn’t increase, yet you could have a sizable nest egg after 20-30 years, and what’s the point of having money if you can’t enjoy it?

      I know some people may disagree, but I don’t include the value of my residence in my net worth. Like you said, it’s no good if you’re house-rich but cash-poor. Also, the only way to unlock that value is by selling your home and renting, or moving to a cheaper home, and I have no intention of doing either.

    1. Thanks for the comment Doc. You get it. Money is supposed to reduce stress and make your life easier. At a certain point, it doesn’t make sense to worry about every dollar because it stops having a meaningful impact on your net worth!

  4. We do a monthly budget and we’ve got a line item for money that each of us can spend (read, waste) on whatever we want. No more money fights, for sure! I can buy a latte at Fivebucks and he can get yet another wrench, and who’s counting because its our own blow money. Right now its $100/month each. That’s in line with a net worth of $100k, but we are WAY above that now and we just never raised it. Most months I don’t spend all of it, so I don’t think it needs to continuously raise with our net worth. But that’s because we’re aiming for “extreme early retirement”, so we’re trying to keep our costs down.

    1. Thanks Samantha! Sounds like you guys are on the right path to FIRE! I would like to work until I die, so I want to take advantage of my money instead of my heirs:)

  5. Interesting concept!

    Currently my fiancée and I still run every purchase by each other. I have a budgeting app where I put all of our expenses, so that’s why we mainly report it to each other. I am not going to lie though…When we get to $1 million, I know I would still freak out if she spent $1,000 without telling me haha.

  6. We have always followed a similar rule only we set the amount back when our net worth was about 40k. So even though we have a multiple 7 figure net worth now we still run $40 discretionary purchases by each other. That doesn’t count normal replacement items like running and tennis shoes or getting racquets strung but would include a new fishing rod. We kind of froze our cost of living early in our 30 plus year marriage and it felt right to freeze our discretionary limit as well. Odd fact, tennis balls have not gone up in price in over 40 years, they’ve been $2-3 per tube of three balls since I was a kid.

    1. Thanks Steveark. Talk about fiscal restraint! Interesting point about tennis balls – I guess they haven’t really changed much, although neither have golf balls and those are so much more expensive now (mainly marketing hype).

  7. Interesting concept! I think the frequency of this should have some type of partner rule but I believe you are generally covered due to you and your wife’s compatibility. Here’s hoping you two don’t discover a new expensive hobby!

    1. Thanks for the comment Rocky. No, I need to find an expensive hobby to give me more reason to grow my net worth! Maybe something like polo, or watch collecting.

  8. That’s an interesting way of doing it. I know my wife and I wouldn’t be able to do something like that. I would be buying a lot of $100 or less items (read: video games).

    We actually take an allowance to keep us (read: me) in check. But whatever works, everyone is different!

    1. Thanks for the comment Budget. I’m glad you found something that works for you. Video games are a cheap form of entertainment, btw.

Leave a Reply

Your email address will not be published. Required fields are marked *