The 80/20 Rule – Lessons in Life

By Kevin Gibbons

How many times have you heard different versions of the following?

“Good Enough Isn’t Good Enough”

“Perfect Practice Makes Perfect Performance”

“’Good Enough for Government Work’ Explains Why the Government Doesn’t Work”

Americans are obsessed with perfection. Whether it’s their children getting straight A’s, a 4.3 Grade Point Average (on a scale that is supposed to run from 0 to 4…), getting 10’s on a judges’ scorecard, or even “giving 110%” in any effort, we are fixated on error-free, ideal performances. When I was younger, I did (and admittedly, sometimes still do) fall into this trap of counting anything less than perfection as an outright failure. It was while working with clients of The Savvy Life that I truly learned a better approach to facing challenges.

A core service we provide at The Savvy Life is helping clients develop Spending Plans to live within their financial means and achieve their long- and short-term goals while enjoying the journey. A key part of the Spending Plan process is to understand where they are currently spending money and to develop the tools to track their spending so they can monitor it and adjust to match the plan. For many people, the idea of tracking every penny is incredibly daunting. The commercial apps are not always intuitive or easily configurable for individuals’ circumstances. It is common for our clients to become overwhelmed trying to reconcile every transaction and figure out where that last 13 cents goes in the monthly tracking report from their chosen app.

This is where the 80/20 rule comes in. If these clients focus on tracking their biggest expenses, the ones that are driving their economic health, and for the moment ignore the smaller items, they can start making the positive changes necessary to improve their financial situations. We often advise clients to concentrate on a small number of spending categories, understanding how much they are spending there and how they may reduce that spending, before trying to understand, control and change everything. You do not have to have a perfectly balanced account sheet to make effective changes to your spending and living habits. If you are close, and you are tracking the main drivers of your financial life, you can get the large items under control.

Controlling 80% of your spending is a good start. Read that paragraph above again. Note that is says for the moment, ignore the smaller items. What the 80/20 Rule does is give you permission to not be perfect from the very start. If you can get started and identify a tracking method that is good enough to get you on the right path and monitor your critical expenses, you can start making changes. Once you understand and are controlling those critical expenses, you can take the next step and look at the next level of items. Does this mean that you should ultimately strive for 100% perfect reconciliation?  You can. You can also accept some level of imperfection that balances your financial and emotional tolerances. Someone who consistently has a surplus of $2,000 every month (in that they routinely spend less than they make, and are fulfilling all their long- and short-term financial goals) may not want to spend their Saturday morning looking for a missing $10 in their bank statement. While the person who is living closer to their financial edge may find that time well-spent.

The critical life lesson of the 80/20 rule is to not let the burden of perfection keep you from getting started, whether that’s tracking your spending, learning a musical instrument or sport, or taking up a new activity. If you are so overwhelmed by the prospect of going from zero to perfect that you never get started, you are certain to never get there. Get started, strive for competency, rather than perfection at the outset. Once you achieve that competency, then you can determine how good you need to be to be successful.


Kevin Gibbons is a Cash Flow Planning Expert, the Vice President of The Savvy Life and co-author of the international bestseller Living The Savvy Life. For the past eight years, Kevin and Savvy Life Founder Melissa Tosetti have worked with over 525 individuals and families to create Spending Plans.

They also work with financial advisors and their clients doing cash flow planning as well as giving Savvy Living presentations via webinar and in-person to audiences across the U.S.

To learn more about how Kevin and Melissa work with clients, visit The Savvy Life’s Programs Page.

If you’d like to learn more about how they work with financial advisors and their clients visit: The Savvy Life Advisor’s Page