The 2X Principle and Spending Perspective



I’ve come up with something I call the 2X Principle.  Before I get into it, let’s go over the Rule of 72 because the 2X Principle is a similar concept.


The Rule of 72

2X PrincipleThe Rule of 72 is an easy way to figure out how long it will take for an investment to double in size over time.  It’s fairly straight forward.  You divide the number 72 into the annual interest rate, and that result is a rough estimate of how many years it will take to double.  


So if you have an interest rate of 8%, you would divide 72 by 8, and you get 9.  Therefore, it will take 9 years in order for that investment to double.  A 12% interest rate will result in 6 years for an investment to double, and an 18% interest rate will take 4 years.  I think you get the picture.


The 2X Principle

I know I know, predicting the market is silly.  It’s a fool’s game.  I outlined the Rule of 72 to introduce a new concept that has been bouncing around in my head called the 2X Principle.  This Principle relies on two assumptions:  

1. That the stock market on average returns about 8% annually, and

2.  It usually takes 9 (almost 10) years for the market to double.  

When you use the 2x Principle, you multiply a monetary amount by 2 to determine future valuation in 10 year increments.


The Math

This 2X Principle compares spending today versus money available to spend in the future.  So for every
$100 that we spend today, in 10 years from now, this amount would result in $200 (2 x $100).  This figure would simply double for every ten years.  In 20 years, this amount would result in $400, and in 30 years, this amount would result in $800.  


My Workday Lunch

foodI started to think about this concept when I was eating out the other day and wondering if I really get my money’s worth when I’m out buying lunch.  I know for a lot of the frugal people that the answer is normally a resounding no.  In an effort of saving money on food, it’s a no brainer to bring in lunch.


On the other hand, I hate eating lunch at my desk.  I love the ability to get out of the office, go for a quick drive to clear my head and recharge for the rest of the day.  As an introvert, I know that if I don’t recharge for the second half of the day that I will be too drained to make the right decisions for my team.  


phoneI also use that lunch hour to handle personal calls, emails and even check up on the blog during the day.  I feel too weird conducting these types of things at work and would never want my employer to think that I was neglecting my duties, so I tend to stay off the internet unless it’s truly work-related.


However, obviously going out to clear my head and catch up on other things in my life comes with a real cost associated with it.  The other day I was getting a burrito from Chipotle, full disclosure I am a shareholder, so I try to go at least once a week.  The lines are starting to pick up, so hopefully my investment will turn around.  Quick side note, if you ever hear me talking about buying a falling stock, please stop me.  Chipotle was a falling knife, and I have definitely have not done well.



foodWith all that said, I was standing in line and the 2X Principle came to me.  Would I still enjoy this $8 burrito if I could have 16 extra dollars ten years from now?  What about $32 in 20 years or even $64 in the more distant future.  At that point, I was super hungry and was anxiously waiting to devour my delicious chorizo burrito.  By the way, if you haven’t had the chorizo at Chipotle, it has quickly become my favorite meat option there.


So it got me thinking about how much I spend on restaurants each month.  It’s normally about $100 a month.  Added up over 12 months, that’s roughly $1,200.  Or over 10 years $12,000.  Using the 2X principle, in 10 years, it would actually be roughly $24,000 that could have been allocated towards my FIRE account.  


Frugality vs. Value Spending

dogI started to think about the difference between being frugal versus valuing the things that I spend money on.  For instance, I could be a miser and never spend a dollar and save almost everything that we make minus the bare essentials.  But here’s the thing, we currently save over 70% of our take home pay.  If you include contributions into our 401ks, we are saving over 75%.  


I’m sure if we were super diligent, we could save closer to 80%.  I’m sure others could even squeeze out more.  Honestly, we’ll never get much past 80% because my wife values good nutrition and eating healthy, and also, we tithe, which is very important to us.


Our Spending

churchIf you look at our Personal Capital account, our top 3 expenses are tithing, food and travel.  These are all very important to us and are definitely in line with what we value as a family.


With all that said, there are definitely times that I look at our discretionary spending and think wow, was that really worth 2x in 10 years?  A lot of times, I’ll say yes, but there are definitely times that I question it.  


shoeDoes cause me to reevaluate some things?  Absolutely.  Instead of paying $100 for a specific pair of Nikes I had been eyeing, I found a similar pair of Nikes on sale for $28 that were a 1/2 size too big but fit perfectly with a thicker sock.  


I definitely struggle with a balance between valuing money today versus valuing money tomorrow (or in 10 years).  It’s something that I work on everyday, and the 2X Principle is something I think about more and more each day.  


Have you ever considered the 2X Principle before?  Or are you more focused on the here and now?  Share your thoughts below.

Mustard Seed Money

Welcome to the website. A mustard seed is a very small seed but astonishingly grows very large over time. My hope is that through your financial journey that your small investment in time, money and faith will grow beyond anything that you could ever imagine.


  1. Your article reminded me of a piece of paper I found when helping clean my grandparents house after they both passed away. It was yellowed and old, but it had the rule of 72 written on it with notes about what it was. I was already familiar with it but smiled at the idea of my grandfather writing this down back in the 70’s.

    I like the idea you have of rounding the rule, so you can do a simple calculation as to whether a purchase is worth the long-term cost. Sometimes it is worth it-and that’s OK! As long as the purchase is in line with your values it doesn’t need to be “right” or “the most frugal choice ever”. The important thing is asking yourself the question and being mindful of how what you buy will – or won’t- get you to your goals, whatever they may be.
    Liz@ChiefMomOfficer recently posted…Chopped Championship – 5 Tips for Free Family FunMy Profile

    • Sounds like your grandfather was incredibly wise if he was making notes around the rule of 72 in the 70s 🙂

      And you are absolutely correct, it’s definitely ok to make purchases in line with your values 🙂

      Thanks for stopping by and sharing!!!

  2. Interesting thoughts. I spend more in the here and now with smaller expences. But with expences that are costing more, I defenitly think of what the impact will be on the long term. The most important question, for me, if it’s worth the money. If you really like something and you willing to spend money on it, just do it.

  3. Impressive savings rate! Especially considering you aren’t living like a miser 🙂

    I like your 2x tool, definitely helpful. I’m always thinking about this. When fresh out of college it was a super focus of mine because I wasn’t making much then and trying to save everything I could.

    Now, I still use that tool but am more willing to spend on the things I value.

    Great post! I’ll have to try the chorizo sometime and hopefully help your stock to come back!
    The Green Swan recently posted…Minimalism: The Urge to PurgeMy Profile

  4. Great post and yes I do agree with checking whether you value something as a great way to bring you finances under control. However there is one piece missing to the equation above, marginal utility. Every dollar saved, purchase made, income increased is not equal. Going from75 percent to 80 percent is less valuable to you then going from 5-10. So to would be spending 1000 on restaurants a month imstead of 100.
    Full Time Finance recently posted…A Risk Free and Tax Free 3.5% Return: Savings BondsMy Profile

  5. Interesting concept. I think it would help more to look at yearly costs instead of small expenses as they happen. For most people, if you tell them they could have $20 in ten years if they forego the $10 lunch today, I don’t think it would have much of an impact on their decision. But if you eat out constantly, and spend say $2,500 a year just on eating out for lunch, then it would be more impactful to think how you could have $5,000 in ten years by changing your habits.

    Again, it gets back to your concept on value spending. We could look at every expense through this lense and eventually end up living in a shack and saving every penny possible. If eating out for lunch most days brings that much value to you, then I would say forego the future money, assuming you’re practicing good spending habits overall.
    Go Finance Yourself! recently posted…Love and MoneyMy Profile

    • Thanks for the great long term perspective. I definitely think a yearly view would cause people to really pause if they saw how much they were actually spending. Thanks for stopping by and sharing!!!

  6. The rule of 72 is definitely useful during investments, but to be honest I would never use it with reference to everyday expenses. Within reasonable limits you should still enjoy life in the present, don’t put everything aside for the future yourself. If you take it as a principle for your small expenses, you would never eat that burrito, because even if your 8$ becomes 32$, you will still wait it to become 64.
    Just go and eat it, with a 70% saving rate you really deserve it 🙂
    Roadrunner recently posted…Emotions and InvestingMy Profile

    • Thanks Roadrunner for the perspective. I am constantly trying to optimize my life but at times this can be a deterrent. You are absolutely right when you say that you should spend money on things that you value 🙂

  7. I agree with Roadrunner. You are already saving 70% of your income, treat yourself to lunch. When you are doing the big things right, which you are, buying your lunch is a value to you.

    I know food is always a big item on everyone’s budget that they would like to spend less on, but in my line of work, I would put your food purchases as one of the most important investments we make each day. Are you eating the right foods, which tend to be more expensive?

    You can coupon clip your way to lower grocery bills, but you will likely end up eating highly-processed nutrient-deficient products that will increase your healthcare costs later.

    When it comes to food, you will pay for it now with good, whole nutrient-dense, balanced food choices or pay for it later with increased healthcare costs. Think of making healthy food choices as investing in lower healthcare costs for yourself in the future.

    I know that there are some things we cannot avoid and the fates play a role in that but much of the disease we see every day is the result of poor choices over time. It is very similar to the choices we make for FIRE.
    Doctor in Debt recently posted…Weekly Roundup Number 1: November 6thMy Profile

    • Thanks for the great perspective!!! I definitely try to eat quality food when I go out to eat and avoid as much processed food as possible 🙂 Hopefully it will pay off in the long run!!!

      Thanks for the awesome comment!!!

  8. Interesting thoughts! I have thought about something similar, but only with bigger purchases (like a car or something along those lines) and not everyday expenses.

    For everyday expenses, I think that as long as you’re not going crazy and overspending, you shouldn’t worry too much about it. Besides a 70% savings rate is great!

    I tried the chorizo as well a while back. It was not bad, but I still prefer the chicken haha 🙂
    Andrew recently posted…6 Ways To Save Time And Money At The AirportMy Profile

    • I think it’s great that you’re applying this to large purchases!!! I think for most people if you can get the big purchases right that gets most people 90% towards their savings goals 🙂

      My wife still prefers the chicken at chipotle so I completely understand.

  9. Keep eating at Chipotle for lunch…You are helping BOTH of us out as I am a shareholder as well!! 😉

    Great numbers here – I am so not into math so I appreciate you taking the time to walk thought it for some of the non math savvy PF freaks. I do think about future cost of things – If I buy will it still be worth what I thought it was had I just invested the money? But I try no to get too bogged down in it. If something were to happen to me, I want to know I didn’t live my life any less just waiting for the future to happen. Great read!
    Miss Mazuma recently posted…Pt 3 -Recovering From the Fall of My EmpireMy Profile

    • Thanks for reading Miss Mazuma!!! I definitely agree that sometimes I can get too bogged down in the numbers and just need to live my life the way that I want to.

      Chipotle is definitely going to be for lunch today 🙂

  10. Your 2X principle dovetails with the FIRE concept of saving 50% of your net pay. The thinking is that if you can live on 50% of your net, you are essentially earning 2 years of living expenses per year. That in turn means you can retire one year earlier for every year you save 50%. Implicit in that concept is 1) you earn the historical avg returns on that 50% you saved, 2) your lifestyle costs don’t grow faster than your salary and resultant 50% savings and 3) inflation doesn’t outpace your earnings.

    The concept is simple – spend less today, have more tomorrow. Some people get caught up on the spending/saving part. Some people are too scared to invest. On the back end, some older people can’t spend the money they saved because they have lived a lifetime of not spending.

    • Thanks for sharing Dan. You are absolutely correct with savings the 50%. Why I didn’t connect the dots in my post is beyond me but I appreciate you adding further to the discussion. Like always thanks for the awesome comment!!!

  11. As long as we’re meeting our saving goals, I don’t do the math for other expenses. If we ran the numbers every time would that result in us spending even less? Possibly. On the other hand it might make this whole journey to our FIRE goal feel unbearably dreary. FIRE isn’t an easy goal and we’re already making sacrifices to get there. There is a line between healthy sacrifice and deprivation, and I want to keep us on the right side of that line. For my family, one way to do this is not to run the numbers all the time.
    Mrs. BITA recently posted…How to Be Wiser Than The Magi (giving the gift of a mind worm)My Profile

  12. Dang. Frugality v. value spending is definitely something I go back and forth on. I liked seeing your perspective on a large and small scale. The 2x rule working on your $8 burrito, doubling etc over time was not that convincing but thinking about it in bigger terms (spending $100 a month and seeing the 2x rule) makes it hurt a lot worse. While I’m paying off debt I’ve got to keep that bigger picture in mind.
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  13. I didn’t know about the 72 rule, so this is all new to me! The way I look at discretionary spending is to ask myself if it is worth 25 times its cost, on the basis that, to maintain it, I’d need 25 times its value in savings/ investments. I’m not sure this quite works for work lunches though, because when you no longer work, the need to buy lunch out reduces.
    Sarah recently posted…Remembrance, why I love Canada, and attitudes towards moneyMy Profile

  14. That is a very interesting perspective. I know the rule of 72 but I never thought about it the way you described it. From now on, I will be thinking of the 2X principle before making a spending decision.

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