Financial freedom is living life on your terms. It’s the power to follow your passion and dreams. It’s having the money to retire when you wish, without having the worries of daily expenses. If you wish to enjoy true financial freedom, you must strive for it. This is perhaps where the 80/20 rule comes in.
The 80/20 rule is really simple and can improve finances. You just have to put effort in it. The 80/20 rule for investing is the 20% of the effort you spend on deciding where to invest, gives 80% of your returns.
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The 80/20 rule for decision making is where 20% of your financial decisions give 80% of financial results. Say you spend a lot of time and expenses commuting and badly need a car. So, you decide to finance the purchase of the car with a car loan. You look around for the best possible car loan rates from a bank nearby. This decision-making rule helps achieve true financial freedom.
Well, under the 80/20 budget rule, make sure you allocate 20% of income towards savings and the remaining 80% on pretty much everything else. There’s no need of any expense tracker for the 80/20 budget rule. It’s just too simple. You just allot 20% of income towards savings. The 80/20 budget rule is real basic stuff. You must always strive to save more. Go for the 70/30 and the 60/40 rule where you save 30-40% of your salary.
See Also: Learn How to Achieve Financial Freedom
The 80/20 rule states that 20% of your effort gives 80% of the results. This doesn’t mean you must compromise on work by coming to work just once a week. It means you get more bang for your buck. The 80/20 rule has nothing to do with time. Its focusing effort and work on where it’s needed.
Let’s say you are in business. Your research finds that 20% of clients fetch 80% of profits. It’s common sense to focus efforts where it pays. So, you focus time and effort on developing strong relationships with clients. You focus on these clients, before going on to other activities.
See Also: How to Set Financial Freedom Goals?
Last but not the least, focus on needs and not wants. This helps you master the 80/20 rules and move on the path to financial freedom.
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