At a time when your dreams are just a click away, it has never been easier to run up more debt than you can handle.

Those smartphones we all carry were supposed to give us access to information to make us smarter consumers. In fact, almost half of shoppers say they use their phones to make frequent purchases “on a whim,” the worst kind of shopping decisions.

And we are paying for it, running up an average household credit card balance of $8,316 and a total credit card debt that has risen from $857 billion in the pre-smartphone shopping days of 2013 to $1.04 trillion today.

It’s a perfect storm of technology that enables consumers to make impulse purchases while marketers create highly targeted, sophisticated advertising pushing us to buy items that are beyond our means.

So, what can you do? Although there is no one-size-fits-all solution to financial-management issues, I have found a simple and effective way to think about spending that will lead to better and more informed choices, regardless of what you are buying or consuming. I call it the Rule of Eight, a spending state of mind I discovered after years of being upsold and watching the seemingly unstoppable advance of luxury consumption, regardless of one’s means.

The first component of the Rule of Eight is the quality component. Think of the quality of any item you purchase on a 10-point scale: a “one” is the lowest quality/throwaway item and a “10” is the highest quality available.

The Rule of Eight says that once the quality (you can substitute the word “luxury” here) of any purchased item exceeds eight on the 10-point scale, the price rises very rapidly, yet the usefulness of the item (economists call this the “utility” of the item) barely changes at all.

Stated another way, the last two points of quality in moving from an eight to a 10 are fantastically expensive for the additional utility gained. An example from your household is that a GE Profile Range (seven or eight out of 10) has virtually the same utility as a luxury brand such as Wolf but at a fraction of the cost. Yes, I am sure that the Wolf is awesome and has some really cool features, but both ranges operate on the same principle of heat-plus-raw-food-equals-dinner!

Another part of this is the compulsion to buy the latest model of a product. These days that is often a smartphone. Does your phone need replacing every year or are you just giving in to the marketing that touts the new model’s speed, camera, facial recognition, RAM or coolness factor? Or is the reason that most dreaded and deadly reason of all: because everyone else has one?

The great thing about the Rule of Eight is that you can apply it to everything: from concert tickets, cars, cocktails and coffee to hotels and homes — and, yes — AirPods to smartphones.

The second component of the Rule of Eight is quantity. This is an easy one: 80% of your purchases should conform to the Rule of Eight. So, in practice this means that most of your spending will not be on super-high quality brands and items.

And this brings us to the upsell: the ability of a seller of a good or service to convince you that you must have the highest-luxury item in any category (nine or 10 on the Rule of Eight scale). Burger and a beer? “We source our beef from Brazil and the $12 craft brew is a limited batch made with hazelnuts.” Need a coffee to start your day? “The Americano with an espresso shot at Starbucks is $5.” (Starbucks is in my 20% bucket, by the way).

Now, I’m not one of those folks who carries a sack of mashed-potato sandwiches to work for lunch every day. I like to enjoy a splurge as much as the next person, but anytime a heretofore everyday good or service is sold as an “experience,” I know I’m being upsold.

I don’t pretend to know or judge what you choose to spend your money on. But I can promise you that if you insist on a nine- or 10-point quality in most of the things you buy, you are going to have a hard time paying off your credit card, let alone saving any money.

Save your 20% spend for those “luxury” items that really matter and mean something to you. For the rest of your purchases, “pretty good” is more than good enough. Adopt the Rule of Eight and you will be surprised how much money you are wasting on needless “luxury.”


William Acheson is chief financial officer for GWG Holdings based in Minneapolis.


Editor’s note: Submissions are invited. They should avoid promoting products or services and should be 700 to 900 words in length. Send to Doug Iverson, business team leader, at