Some Italian peas changed the way we function
Legend has it that Italian engineer Vilfredo Pareto noticed something peculiar about the peas growing in his garden. Vilfredo recognized that approximately 20% of his pea plants were yielding 80% of the pea crop.
Pareto wondered if this applied in other situations, such as macroeconomics. Sure enough, when he did the research, he realized that 80% of Italian wealth was (and still is) controlled by 20% of the population. Pareto's insight became known as the Pareto Rule or The 80/20 Rule.
Today, we will show you exactly how to apply the 80/20 rule to your life to create more money, time, and happiness, starting with how the law works!
What Is the 80/20 Rule
Simply put, the 80-20 rule states that 80% of your outcomes (outputs) come from 20% of causes (inputs). Using the pea example, 80% of the peas eaten from the garden came from 20% of the plants.
In business, the law states that you should focus your efforts on identifying the most productive 20% (clients, channels, sources of income) and spend 80% of your time there. You can use the popular 80/20 rule to fit any facet of life, however, and many use it to help them strategize how they spend their time with regards to:
- Business & Investing
Mainstream Examples of the 80/20 Rule
- 80% of your business will come from 20% of your marketing
- 80% of Covid is spread by about 20% of people
- 80% of crime is committed by 20% of criminals
- 80% of car accidents are the result of 20% of drivers
- 80% of worker productivity is completed by 20% of your staff
- 80% of your business revenue will come from 20% of your clients
- 80% of the team’s points came from 20% of the players
Benefits of the 80/20 Rule
It's normal to be a little hesitant in applying a new operation philosophy in your life. The 80/20 rule typically leads to better results in the areas of:
- Time management
- Efficiency & productivity
- Fixing financial issues
Take, for instance using the 80/20 rule to manage your time better. There's probably a time of day when you are the most productive and even if it's only 20% of your day, you can get 80% of your daily tasks done during this window of time. Figure out what that is–early morning, after exercise–and tackle your most crucial efforts there to get the most done in the least amount of time.
Another possibility is that you're getting 80% of satisfaction out of only 20% of your expenditures. You might be blowing money in ways that don't really add any happiness to your life. So figure out what that 20% is and chuck the rest. Below you will find some examples that can guide you in incorporating Pareto’s principle into your life!
How to Apply the 80/20 Rule in Your Life
Here Are Some Ideas To Help You Use the 80/20 Rule With Health:
- As long as you eat 80% clean and nutritious foods, you can eat less healthfully 20% of the time
- Runner? Spend 80% of your time running at a moderate rate, 20% of your time pushing yourself.
- Looking to lift a lot of weight? Invest 80% of your effort moving moderate weight with perfect form!
Business, Wealth & Investing
Ever heard of the 80/20 budget?
In essence, the concept is very simple, 80% of your money goes to your expenses, the other 20% goes to savings and cleaning up your financial obligations. This is often referred to as paying yourself first!
When it comes to applying Pareto’s law to your life, you can most greatly benefit from it in terms of business and money.
Case in point, in 2020, when the pandemic hit, I had a friend who owned an exterior remodeling business make a pivot in how he approached his business.
Completely unaware of the Pareto principle, he said, “80% of my money comes from gutters and roofs,” he continued and elaborated, stating, “And 80% of my headaches come from siding and window projects.”
His solution: He focused almost all of his marketing and production efforts on roofs and gutters.
After recognizing that most of his profit came from just two of his services, he doubled down using the 80/20 rule and was able to get rid of 80% of his problems while focusing more energy on the highest producing services. This is just one example of how applying the 80/20 rule to your business or investing can result in better outcomes!
Examples of Applying the 80/20 Rule in Business, Wealth & Investing:
- You’re a self-employed hairstylist, and you recognize that 80% of your profits come from the color and upkeep jobs, not the cheap haircut customers. It would be best if you doubled down on color and upkeep.
- In reviewing your investment portfolio, you recognize that 20% of your investing efforts are producing 80% of your returns. Now, you know where to take your money!
- You recognize that nearly 80% of your sales come from 20% of your sales team in a leadership role. You now have two options: Double down on the 20% crew OR focus tons of effort in helping the 80% who seem to be struggling. At that point, you can determine whether it is a skill or will… or if perhaps parting ways makes more sense!
You are who you associate with, for better or worse. The 80-20 rule is a great way to distance yourself from toxic relationships and increase time with those positive relationships you truly enjoy.
Dunbar’s Numbers theory states we can only efficiently carry about 150 relationships at a time. You can absolutely know more people, but the minute you start spending time with one person – there is most likely a loss in time somewhere else, with someone else.
Knowing this and wanting to spend the most time with the most important people in your life, be sure to 80-20 your relationships. Identify the 20% of your relationships that give you 80% of your sense of joy and connection.
Even though we mostly think we are in control of our lives, it is estimated that almost half of what we do is on autopilot, the result of habit, for better or worse. Most people have to break their bad habits before they can start seeing the results they covet in their lives. What better way to do this than to apply the 80/20 rule to your daily habits!
Examples of Applying the 80/20 Rule to Your Daily Routines & Habits:
- Spend 80% of your time on your top 20% priorities.
- Figure out what 20% of possessions give you 80% of the most happiness and utility, get rid of the rest.
- Perhaps you work from home, and you find that you waste 80% of your time, and you’re only productive 20% of the day – now it’s time to fix it!
- Spend 80% of your day not on your phone, 20% or even less on your phone.
- Analyze hobbies and where you spend 80% of your time, ask if they’re where you really want to spend your time.
- Decide what brings you the most joy. Focus on that.
Final Word on 80-20ING Your Life!
When reading this, if you found yourself only reading 20% of this article, you’re like 80% of the world – most people read bits and pieces of a blog post or online article.
What you will now recognize is that the 80/20 rule permeates every fabric of our life. Whether it is the 20% of teammates that gets 80% of the sales or you crushing the 20% of health goals that will have the 80% impact on your actual well being, the infamous 80/20 rule is there…
The choice is up to you if you will apply it in your life to create the success you’re after!
FAQ 80/20 Rule Questions:
How does the 80/20 rule work?
80% of your outcomes (outputs) come from 20% of causes (inputs). A classic example of this is that 80% of work is done by 20% of employees. The 80/20 rule makes it easier to make choices, decide where to spend time, energy, and money.
What is the 80/20 rule in a relationship?
20% of your relationships give you 80% of the satisfaction and connection you need. Stop wasting time with the other 80%
What is the 80/20 rule for weight loss?
According to the 80-20 rule for weight loss, as long as you eat 80% good foods, you can afford to fudge a little on the other 20%.
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $200,000 in student loans with his wife in less than four years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post and more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their chocolate lab named Morgan, working out, helping others with their debt and recommend using Personal Capital to track your finances.