Simply put, the 80/20 rule states that 80 per cent of our results stem from 20 per cent of our actions.
By Shivani Gopal published by Women's Agenda August 2020.Those of you looking to maximise your time and work smarter, not harder, have almost definitely heard of the 80/20 rule – it’s a classic. Also known as The Pareto Principle or Pareto’s Law, this strategy is all about using your limited time and resources to complete the few tasks that achieve the largest results.
Simply put, the 80/20 rule states that 80 per cent of our results stem from 20 per cent of our actions.
It’s something that can be seen and used across all industries. 20 per cent of customers account for 80 per cent of a company’s profits. 20 per cent of sales reps will generate 80 per cent of the total sales.
The rule even applies to your life at home! You may have a well-stocked wardrobe of stylish suits and dresses, but 80 per cent of the time, you’ll find yourself re-wearing the same key items over and over again (I know I do!).
The most important thing to realise is that the 80/20 rule is not about doing less work. It’s about finding the actions that hold the most value and spending more time doing those things.
It’s about focusing on the small decisions that make the most significant impact – the areas with the biggest growth.
Of course, to identify your most valuable actions, you’ll need to keep track of the tasks you’re engaging in throughout the days, weeks and months. After you’ve pinpointed those actions, you’ll need to tie them to results.
The good news is that once you’ve done this groundwork, you can apply the 80/20 rule to many areas of your life whether this be your health, business, or relationships.
The great news is, we can even apply this simple rule to our personal and financial development. Let me show you how…
First and foremost, I’d like to acknowledge that everyone’s budget and living situation is of course different – there’s no cookie-cutter solution here that will fit everyone. So, take these learnings and ideas we’re about to get into and adapt them to suit your personal financial situation.
When talking about budgeting, many articles will tell you to skip the daily coffee or forego that avocado on toast. The simple fact is that cutting out these small indulgences doesn’t make that much of a difference. The small joys don’t cost you much in the long run really, especially when compared to mortgages, so if you love your daily coffee, have it!
Instead, what you really need to do, is go through your bank statements and identify the areas where you’re spending big chunks of your money (the 80 per cent). Once you’ve identified them, work out how you can reduce them.
For most people, this will be your housing, bills, transportation and debt. There are many easy ways to reduce the financial burden in these areas, however they do often require a lifestyle change in one way or another so you will need to approach this with an open mind and a focus on the importance of the long term savings benefits you can reap from making these changes
In addition to using the 80/20 rule to reduce your spending, you can also apply it to increase your profits and gains.
An easy solution is to automate your investment plans and bank account set-ups! For example, you can easily set up monthly automatic investment plans that transfer money from your bank account to your investment accounts.
Spending a small amount of time working out you budget and then automating your finances takes a very short amount of time upfront and gives you an immense amount of benefit in the long run – set you up for long term financial success.
Good luck and I would, of course, love to hear how you go. What small financial decisions will you make to create big change and big financial rewards this year? Email me at hello@elladex.com