The Rule of 15: Superpower your savings

A little positivity, a personal finance trick, and some ideas for saving in a difficult time

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Some positive numbers for a change

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I know it’s been a little longer than normal since my last article and I’m sorry. I’ve been in a sleepless daze since we got our new Golden Husky puppy—Banjo!

She’s sleeping through the night now but has a lot of energy…

… and no, there’s absolutely no way to justify it financially, but it was still the best decision ever.

Cutting Costs

I will try and write an entire article in May 2020 and not say anything about the elephant in the room. Given the current global situation, which shall not be named, I’d like to give you a really simple and helpful tool that will improve your finances drastically. It’s called The Rule of 15.

Everyone is trying to cut their costs and preserve cash because they’re feeling some level of financial uncertainty right now. The worst thing you can do is stop investing your money every single month. 

I know this is easier said than done, as many people have either lost some income or are feeling precarious about their employment. However, I urge you to look everywhere else you possibly can for savings before you stop investing. It may seem counterintuitive to some, but times of economic uncertainty or downturn are the best times to be investing your money. If you stop investing now, you’re giving up your opportunity to buy low.

If you’re going to keep your monthly investments going and your income has been reduced, how are you supposed to live? Remember, depending on your income tax bracket, $1 saved is actually equal to $1.25-$2.15 earned. I made a handy table to help you figure out what your personal savings-to-earnings leverage is.

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Use this table to find how much you need to reduce your spending. For example, if you make $60k in Ontario and have lost $500 a month in income, you only need to reduce spending by $350/month ($500/$1.43) to keep the same lifestyle and monthly investment.

When trying to find ways to reduce your spending, it’s hard to know where to start and what’s going to make a material difference. I’ll start you off with a few ideas and hopefully others will comment with theirs. Though, before we get into that, let’s learn The Rule of 15. 

The Rule of 15

Any one-time savings that’s invested in the stock market, will become 15 times its value in 40 years.

It’s also true that any annually recurring savings will generate 15 times its annual value if invested every year for 10 years.

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Finally, if the annually recurring savings are invested every year and continue to compound for 40 years, there will be 215 times the annual savings.

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These results assume a 7% average annual growth rate over a long-horizon, heavily stock-weighted, and diversified investment portfolio. Something that can be easily setup with a few clicks at Now that you know my handy mental math trick, let’s put it to work with a few examples.

Put it into practice

La Ramblas, the main shopping and walking street in the center of Barcelona.

If you didn’t believe me that owning one less car was a good move before, you’ve likely had a change of heart as your car sits in your driveway unused. As we discussed in my previous article, owning a car costs a minimum of $6,000 per year. Using The Rule of 15, we know that getting rid of the car for even one year while we’re all stuck at home will turn into $90k (15 x $6k) in 40 years. Now imagine that you discover you or your family no longer needs that extra car and you have one less car for the next 10 years, then you’ll have that $90,000 thirty years sooner. Ultimately, if you change your habits completely and live the next forty years with one less car in your life, you’ll have $1.3M (215 x $6k). See how easy that math is? Let’s try another one.

New ISDN Cut-off-Telephone-line-being-cut-scissors-compressor ...

Right now, there are no sports on TV and the news has never been more repetitive. Since we know you’re only watching Netflix, Crave, or Hulu anyway, maybe it’s time to finally give up that cable TV service. While you’re at it, please ditch your home phone. Many service providers are giving hefty discounts right now to keep customers. If you can save your family $85/mo, that’s $1,000/year and you’ll have $15k invested in ten years and $215k in forty years.

How about that fancy $100 per month gym membership with “free” razors and towels in the bathroom? That’s $1,200 per year. Even if you only cancel it for this one year, you’ll still have $18k (15 x $1,200) in forty years. 

The best part is that you’re already doing it without knowing. That daily trip to Starbucks that used to be $4/day and $960/year. If you resume the habit next year, you’ll still have $14k in forty years but if you kick that habit entirely, you could have $206k.

I hope these examples have illustrated how easy it is to use The Rule of 15 in your everyday life. Knowledge is power and using a simple mental calculation to know what a small change today can lead to over the long term is a superpower.

Please comment with your ideas for how readers can reduce their spending while we’re all stuck at home—try using The Rule of 15! If you enjoy the newsletter, please share with friends and family and ask them to subscribe. If you really love it, become a paid subscriber and simultaneously support the newsletter and the planet.

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