What’s the 80/20 approach?

The gist is simple: 80% of effects come from only 20% of causes. It’s based on the Pareto 80/20 Principle.

While it’s not perfect science, many times it turns out to be true.

Take exercising as an example. People stress over which workout is the best. Which home gym. Which bike.

They spend HOURS researching every detail, and, before they know it, 6 weeks has gone by.

All the while, if they had just done SOMETHING (ANYTHING really) over those 6 weeks, they would have seen results.

It’s because 80% of the output is accomplished from only 20% of the input.

And that doesn’t mean you’re only putting in 20% effort. It just means you can get most of the way there by getting the core things right.

Sure, you can tweak your workouts. But there is no magic pill. It’s not rocket science. Mostly you just need to burn calories…consistently.

It probably does matter that you do some combination of cardio and strength training. But that’s not really the crucial part of exercising. That’s not the key.

The key to exercising is…EXERCISING!

You have to actually DO the work. You have to move. You have to take action. It’s that simple (note I said simple, NOT easy).

Do you think it matters much whether you do 3 sets of 12 or 4 sets of 10? Whether you walk 3 days/week for 40 minutes or 5 days/week for 20?

Hardly.

Don’t you think it matters a lot more whether you show up in the first place? That’s really the 80% solution for exercising: just show up. That’s what really matters. And it’s also something you can control.

 Just that 20% of the exercise equation gets you to 80% of your result. The fad workouts, the obsession with doing more in less time is the marketers doing marketing. 

And so it goes that most people focus on the wrong things. This is especially true in their financial lives.

I cannot tell you how many silly conversations I have had with clients (and even colleagues!) over the years…

…about what the market MIGHT do. Which stock MIGHT do better in this economy. What tax proposal MIGHT come into law. Which fund performed better and MIGHT continue to do so.

All of those conversations were about things we cannot directly control.

I’m not saying they don’t matter at all. Laws matter…if they’re enacted. Market performance does matter…over the long term.

But it’s also true that you cannot directly control the economy or stocks or congress.  

Your FOCUS should be on the 20% that will get you 80% of your results. The 20% of things that matter AND that you can control.

For (pre)retirees, it is most definitely not “the 5 best stocks under $50” or what some CNBC analyst is saying the new administration is doing with capital gains rates. These things fall into the 80% that yields only 20% of your results. 

You’d do better to focus on THE critical retirement question. That’s part of the 20% of inputs that will get you to your 80% solution.

And with my wealth management clients, I help focus on the 80% solution to start—then we refine as we go. When life changes we adapt and we refocus.

We might look at something together, realize it doesn’t really move the needle, and then we focus again on the core 20% that drives the real results.

As it turns out, the vast majority of the financial services industry gets the 80% solution wrong.

Frankly, the reason our industry hammers on the other 80% of things that don’t matter as much is that those things are at least 500% more interesting.

And they need clicks. They need revenue. They need you to consume.

The problem is that a lot of times the core stuff in retirement planning (or exercise, or life) is kind of boring.

It’s a lot more fun to discuss the 80% that doesn’t really matter—maybe to try to find some miracle new fad/magic bullet/quick fix (e.g. finding the next Apple stock is a way to avoid the boring part where you show patience and you show up consistently over time).

So, my job is to help you tune out all that noise as you get bombarded with it in your inbox, online, and on TV. I’ll help you be more consistent and nail the important stuff. 

And don’t get the wrong idea about my skills with the “80% solution” talk. I didn’t get a B minus on the retirement income test lol (I was an excellent student, by the way). I’d put my retirement income planning process up against anyone’s.

And we’ll work to get all the other details right, too. Because details matter. But the idea is that we’ll focus on the things that move the needle the most FIRST.

So that’s the deal with the 80% solution. I’m ready to help when you’re ready to receive it.

Best,

Ben

Benjamin Earls, CFP®

CERTIFIED FINANCIAL PLANNER® PROFESSIONAL