If I could go back in time and pick the brain of any investor in history, I would sit down with Sir John Templeton. What the man accomplished in 95 years was amazing.
The purpose of this article is not to talk about how extraordinary of a life Sir John Templeton lived, but talk about one rule that he lived by that made him a billionaire.
The 50/50 Rule
Sir John Templeton decided that for every dollar he spent, he would have to invest an equal amount.
Therefore, if he spent $1,000 a month, he would have to invest $1,000.
Paying Yourself First vs. The 50/50 Rule
At first, I thought this was the same as paying yourself first. However, the more I thought about the 50/50 rule, the more power I saw in it.
For example, say I wanted to buy a $10,000 car.
If I paid myself 10% off of every dollar I earned, I would need to make $100,000 before I could buy a $10,000 car. In order to achieve my goal of reaching $10,000, I would focus on growing my income.
If I use the 50/50 rule, I would need to invest $10,000 before I bought this car. In order to get to my goal faster, I would focus on increasing income and decreasing my expenses. Technically, I could get there long before (or long after) I earn $100,000 in income.
How I’m Planning To Apply the 50/50 Rule
In a perfect world, I could start investing a dollar tomorrow for every dollar I spent. Unfortunately, I’m not even close to being able to do this.
What I plan to do is track the ratio of expenses to investments every month. This ratio will be an addition of to my monthly financial review I do. (I’m actually starting to share this with you starting in June)
Eventually, I want to get to a point where I’m at a 1:1 ratio. In other words, I want to be able to invest $1 for every dollar I spend.
It will be a while before I get to this point. It could be 1 year, 2 years, or 25 years, but with consistent improvement, I will get there someday.
In the comments, let me know what you think of the 50/50 rule. Do you see this mindset any different from paying yourself first?
Plus, if you want to know a little bit more on Sir John Templeton’s investment philosophy, here is his famous 16 Rules of Investment Success.