What is the 80/20 RuleSimply 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 can be used 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 kids will do their homework, 20% will not
- 80% of your side hustles will give you 20% of your normal income.
- 80% of the team’s points came from 20% of the players
- 80% of the clothes in your you will not wear, 20% will
Benefits of The 80/20 RuleThere always seems to be a trade-off in life, so introducing a new philosophy to how you operate makes it ok to be a little hesitant. The 80/20 rule typically leads to better results in the areas of:
- Time management
- Efficiency & productivity
- Fixing financial issues
How to Apply The 80/20 Rule in Your LifeTypically regarded as an economic philosophy, you can apply the 80/20 rule to anything in your life. Whether you’re looking to make more money, get in better shape, or expand your relationship with loved ones – Pareto’s law works. Here are just a few examples of how to apply it!
HealthHave you ever heard the sentiment that hitting your health goals boils down to your eating habits? In fact, you may have heard that the key to getting a six-pack abdomen is 80% diet (hmm, wonder where this comes from). Or what about the fact that it is estimated most endurance athletes operate in the moderate heart rate/effort zone 80% of the time? Needless to say, health is an area where you can apply the 80/20 rule to your life and see amazing returns!
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 what you want 20% of the other time
- Instead of a complete diet overhaul, adjust you’re eating habits 12 out of 15 meals, or 80% 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 & InvestingEver heard of the 80/20 budget? In essence, the concept is very simple, spend 80% of your money on things you need, enjoy, and bills – just make sure you’re paying yourself first with the other 20%! Wonder where the concept of the 80/20 budget came from? 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 hair cut customers. It would be best if you doubled down on color and upkeep
- In reviewing your investment portfolio, you recognize that 80% of your investing efforts are only resulting in 20% of your returns. Now, you know where to take your money – to the 20% producing 80% of your returns!
- 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!
- Follow the 80/20 rule to spending money – 80% of your money goes to bills and spending, at least 20% to saving… not food delivery apps 🙂
RelationshipsYou 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. As it relates to Dunbar’s Numbers, 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. Know this and wanting to spend the most time with the most important people in your life, be sure to 80-20 your relationships. Identify where you want to spend 80% of your social and family time by figuring out the top 20% of people you enjoy the most!
HabitsMost 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! 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. Nearly 45 of what you do daily is the result of habit – for better or worse. Knowing this, you might have some new habits you would like to introduce, but you want to be mindful that you don’t overdo them!
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, 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 80% of your health goals and being ok with the 20% you don’t, 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? 80% of your relationship will be great, 20% of it not so much! You can apply the 80-20 rule in all areas of your life, including relationships! You can also use the 80/20 rule in how you spend your time in relationships. Spend 80% of your time with the top 20% of your relationships! 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, the other 20% shouldn’t impact you that much. You don’t need to eat 100% healthy, just 80% of the time!
This article originally appeared on Your Money Geek and has been republished with permission.
Jeff is a fan of all things finance. When he’s not out there changing the world with his blog, you can find him on a run, a Mets game, playing video games, or just playing around with his kids.