What is the Pareto Law?
The Pareto Phenomenal also know as the 80/20 Rule, Law of vital few, and Principle of factor sparsity. It is a generalized phenomenon developed by an Italian economist Vilfredo Pareto in 1896. The reason I say generalized phenomenon is because it is not a formal mathematical equation like 1+1=2. Mr. Pareto worked with lots of numbers, data and statistics. He noticed that 80% of the land in Italy was owned by 20% of the population. He also noticed that in his garden 80 % of the fruits were coming from 20% of the plants.
Was this a Coincidence?
No this was not a coincidence. Mr. Pareto worked with a lot of statistics as a economist. He dealt with numbers and statistics from many different industries such as population, real estate, food production, and many other demographics and industries. Pareto did not discover a coincidence, rather he discovered a relationship between two quantities.
Why does that matter ?
The 80/20 rule was a concept I learned and it taught me that 20% of our daily actions we input, outputs 80% of the results in our life. The other 80% input we intentionally put into things gives us the rest of the 20% in results.
The reason I found this interesting is because its remined me of something that my parents told me growing up. They told me that the small choices I make create a big impact. When I reflect on my past choices, I agree with this point and it is a valid point that I can apply to make better decisions in life overall.
So if you are working towards change and making your financial life more successful the small decisions and choices you make are just as, if not more important than the big decisions. For me this would look like doing food prep and eating at home which is healthier. It would also be staying at home on the weekends and saying no to going out with my friends.
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