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The 80/20 rule, known as the Pareto Principle introduced by Italian economist Vilfredo Pareto, suggests that 80% of results come from 20% of causes.
In personal finance, it means that a few of your key decisions can lead to the most significant results. This rule can help you plan your finances wisely.
Here are six ways to build healthy financial habits and achieve greater results with less effort.
Focus on 20% of your habits that benefit your financial health the most, such as contributing to your retirement fund or investing in mutual funds.
Spend the majority of your disposable income on the essentials and the rest on the non-essentials. This will help you minimise overspending.
Identify the small portion of your expenses that make up for most of your total spending. Cut down on these major expenses to save more.
Some experts suggest that 20% of your income must go directly into your savings or retirement accounts. This will allow you to save consistently.
Prioritise the key income sources that contribute the most to your earnings, following the principle that 80% of your income may come from 20% of the sources.
Pay off the debt with the highest interest rate, as it has the most significant impact on your overall financial health, following the ‘debt avalanche’ method.
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