Use 80/20 rule to maximize savings!
80% Of Results Come From 20% Of Your Efforts
The 80/20 rule was discovered by an Italian engineer named Vilfredo Pareto and is often referred to as the Pareto Principle
But how can the 80/20 rule be applied to improve family fiscal management? Well, if 80 percent of results come from just 20 percent of our efforts, the first step is to prioritize your tasks/activities.
What are your most important tasks not just for the day but for the month? Make a list of them: Paying the bills, making a budget, searching for coupons, finding a part-time job, refinancing the car loan, buying kids’ shoes while on sale, replacing lightbulbs with lower cost led bulbs, finding ride-sharing for after school sports, trying to repair a leaking sink yourself, etc.
After each task write down an estimate of how much time it will take to accomplish. This procedure forces you to identify “bottlenecks” that may have kept you from doing the task earlier. When I follow this procedure in my own life, I am frequently surprised with how little time I think it will take to accomplish ALL the tasks. In fact, it makes me feel more motivated to get started. Why have I been procrastinating so long?
Now, ask yourself, which of these activities will be most valuable to my family. Those with the highest value should be done first. But, maybe you can’t complete your most valuable task in one day? Not to worry. Complete as much of your #1 task as you can and move on to #2. Accept that there will be interruptions like fixing lunch, picking your child up from school or doing a load of washing. Use these minutes away to ponder your #1 task.
At the end of the time you have to work on your fiscal management tasks, place a check mark beside the ones you have accomplished. If you only completed one-half of #1, enter “1/2” next to it. Next morning, get up, get the kids off to school and resume working down your PRIORITIZED task list.
Let’s look at an example. From the list of tasks above, which one has the greatest value to your family? If you don’t pay the bills, the water or electricity may be turned off! But if you don’t make a budget or get a part time job, you may not have enough money to pay the bills? If you can’t refinance the car loan, you may lose it and not be able to get to work! What to do first? You may feel so stressed that you can’t make a rationale decision and start cutting coupons to relieve the stress!
Don’t fall into the trap of doing the easiest tasks first. Frequently these easy tasks are pesky but of the least value to your family. Instead, think which completed tasks would be most valuable to your family. If you pay the bills first, you buy time to complete the other tasks. You can then make a budget for the next month, look for a part time job and refinance the car loan.
In this example, the most valuable task probably took the least amount of time—an hour or so to pay the bills. You might say that 20 percent of your efforts produced 80 percent of the results that kept the family solvent for another month!