If you’re like most people trying to improve your financial future, it can seem like an impossible task. Life seems to have a never ending list of obstacles, inflation has been squeezing wallets across the globe, it can bring even the strongest of wills to their knees. Many people I talk to struggle to even figure out where they need to start to get their finances back on track. One good starting point that can get virtually anyone moving in the right direction is the 1% rule.
The principle of 1% rule is based on the idea that making a series of small, incremental improvements across various areas can lead to significant overall results. This approach gained widespread recognition through its application in professional sports. In the book Atomic Habits by James Clear, the author covered the British cycling team and their rise to fame by focusing on 1% improvements in multiple aspects of training, equipment, and rider habits. Rather than chasing dramatic, sweeping changes, the principle encourages a focus on consistent, minor enhancements that compound over time to create substantial gains. It underscores the notion that the cumulative effect of these small efforts can produce remarkable outcomes, whether in sports, business, or personal development.
Applying the 1% rule to daily life and financial goals means looking at every aspect of one’s spending and finding ways to either optimize income or reduce expenses. When reviewing a monthly budget, it is often easy to find repetitive purchases like coffee or restaurants that can be reigned in slightly. Start by skipping one Starbucks or eating at home one day a month. Take the money saved and put it into a dedicated bank account that is not touched. Virtually everyone I work with has several small things they can do that by themselves are not much, but in aggregate amount up to a big gain.
The human brain is very sensitive to large changes, which is why major shifts in behavior are so difficult. Unlike major overhauls that can be daunting and difficult to maintain, incremental changes are manageable and often easier to integrate into routines. While the brain is sensitive to major changes, it is highly adaptable. Someone who is paralyzed by a car accident will initially be in a state of shock, but over time they will find a new normal. I touch on this more in my online course where we dig into more methods on habits and wealth building.
By focusing on these tiny improvements and being patient with the process, people can build habits that lead to long-term success. The compounding effect of these consistent efforts means that, over time, the results can be exponential, turning small steps into giant leaps. This principle serves as a reminder that substantial achievements often come not from a single breakthrough, but from a dedication to gradual and persistent progress. Before you know it, you will be in a financial place never thought possible.
