5 Ways to Apply the 80/20 Rule to Change Your World

Focus on your best assets and use them to create maximum value. This is the core principle behind the 80/20 rule. And it has helped businesses grow their revenues. Or individuals make the most out of their productive hours.

You’re curious about how you can apply it in your life. So let me share my take on how you can use the 80/20 rule, also known as the Pareto Principle, in five life domains: relationships, finances, hobbies, work, and business.

1. The People You Spend Time With

Applying the Pareto Principle in your relationships is quite tricky. There are emotions, attitudes, contexts, and other things you have to consider. At the same time, just because 20% of the people you spend time with make you the happiest doesn’t mean the rest is invaluable.

I’d like to put a twist, if you will, on the typical understanding of the 80/20 rule. Instead of identifying individuals, I’m starting with circles. These circles include my family, closest friends, work friends, startup founders network, tech geeks club, etc. Then, I’m going to ask which of these circles are bringing 80% of the value in my life?

That value is entirely subjective. I’m investing in various businesses, so my startup founders group is very important on my list right now. I also need a strong support system, and that’s composed of my family and closest friends. So my top 20% include these circles.

Now, what happens to the rest? Of course, I’m not going to avoid them and cancel all my commitments. They are humans, not things. But when it comes to saying no, I’m most likely going to turn down invites from the 80%. I’ll make an exception for those who are part of the 20% of these remaining circles. 

And that’s my last point for this section. Identify the top 20% of people in the circles belonging to your 80%. If it’s your kid’s school, maybe these are the 2 or 3 parents you often interact with. If it’s your gym, your instructor and another buddy could be the top candidates. If it’s a religious community, the spiritual leader. You get the drift.

2. The Things You Buy

This part relates to money management. If you follow the 50/30/20 rule, you know this is the stuff adulting is made of. Quickly: This rule requires you to allot 50% of your monthly income to needs. Then 30% goes to wants while 20% automatically adds to savings.

So now you have 80% of your money being spent on things that are sustaining you at present. Meaning, you’re getting your end of the trade-off right away. You pay your utility bills, your electricity and water supplies keep your household running. And so does paying your mortgage. You increase your equity each time you pay the exact dues on time.

When viewed through the 80/20 rule, a good part of your spending is made for maximizing your value either through home ownership or basic needs management. This is like pointing out the obvious. But there are people who find it difficult to pay off debts because of wrong priorities. So using the Pareto Principle as a lens to understand the 50/30/20 rule may help them.

3. The Hobbies You Have

Be honest. What are your hobbies? And how many hours a day do you spend on them? Don’t worry, I’m not going to scold you because you binge-watch Netflix or play video games all day on Saturdays. We usually think about hobbies as harmless activities. But the 80/20 rule may have a different say on this.

If this principle is about maximizing value with your best assets, shouldn’t you be using your free time to do things that will nourish your body, mind, and soul? In this age of productivity, the time you can set aside for doing “nothing” is absolutely precious. Is Netflix going to maximize the value of your time? If you said yes, I would not argue that.

But look, what if you devote an hour to treating your loved one to a massage? Or finally learn how to play the piano? Or cuddle with your pet? Or study programming, investing, or the like? The activity depends on your definition of valuable. The 80/20 rule is just a reminder to make the most of those “free” hours.

4. The Hours You Put Into Work

The 80/20 Principle can also be applied to work productivity! Mark Manson wrote an awesome article about it. And he started by acknowledging that not all jobs are created equal. That means if you’re doing menial labor every day, the idea that working two hours produces twice the output as working an hour pretty much applies.

But when it comes to doing creative work, you’re more likely to be working for diminishing returns the more you slave away at your laptop. That is, you don’t produce twice the output by working 16 hours instead of 8. In fact, you’re going to make a minimal impact in the last 8 hours. 

Sometimes, it would be better if you did nothing in those times. Why? Because those extra hours you’re putting in leaves you vulnerable to making bad choices and decisions. Then you’re going to work on fixing the bad stuff the next day. And so you’re now working for negative returns. The Pareto Principle is all about making the best use of your best hours. That’s how you produce great work!

5. The Clients You Accommodate/Customers You Target

If you’re running a company, it’s easy to fall into the trap of saying yes to everyone. You don’t want to pass up an opportunity. So you’re practically donating your services to someone. This is the same for solopreneurs or anyone who’s starting out in business.

Why don’t we use the 80/20 rule to help you maximize your opportunities? 

According to the Pareto rule, 80% of your revenue comes from 20% of your clients. Let’s look at your clients as assets. If these 20% are your best assets, what characteristics do they have in common? Once you’ve figured out the answer, you should start looking for clients with similar characteristics.

This is the same for many businesses. You can apply the Pareto Principle in targeting new customers. You look at your best-performing segment and profile the customers. And then you advertise or reach out to audiences like them.

Final Thoughts

The 80/20 rule has many applications in our life, whether it’s personal or professional. But remember, it’s not a hard-and-fast mathematical law. Your computation does not always have to be 80 to 20. Sometimes, it’s 85/15 or 75/25. And when you’re applying it to things like relationships, the numbers become highly subjective.

So when you’re starting to get confused, return to this guide. It may not answer all your questions. But it will help you find a safe ground to land on and begin again.