Anybody studying economics, business, or many other areas has heard of The Pareto Principle: the law that states that 80% of results come from 20% of effort. It is a common rule used in businesses to express that 80% of business will come from 20% of clients, and 80% of clients will come from 20% of marketing effort, and so on.
While not necessarily and inherently accurate, it can be used in a variety of situations to some degree of truth and honesty. One such situation is that of a very important sector in personal finance: saving money.
If 80% of your savings will come from 20% of what you do to save, then it is important to identify the 20% and do more of it, while discontinuing ineffective areas.
Where I spend the most time to save money is through coupons. Locating, clipping, organizing, and coordinating with sales clocks in at about four or five hours per week. I could do it in less, but I have a sort of obsession with it at this point.
I am not currently employed, but I do have better things to do, so I value my time at about four dollars per hour. This means I am spending $20 per week in time to save money through coupons. I do not save $20 per week through coupons, so this is a futile effort. I should cut down on time spent until I create an equilibrium, but I consider it a form of amusement as it relaxes me.
We also save money by living with my parents, where we pay $275 per month in rent and utilities. This is a flat rate, so there are no savings to be found here.
Monthly cellphone bills, our gym membership, and our Netflix subscription are another thing. We could theoretically give each of these places a call and ask them to lower our monthly fees. This could save us, say, 25%, which is $50 per month. This is more than I save with coupons with a lot less of an investment.
Similarly, I could ask for a lower interest rate on my credit cards and threaten to change banks, but I do not currently carry a balance, so this would be pointless.
Where are you spending 20% of your time to create 80% of the results? Where are you spending time that you probably should not? Do you use coupons? Do you consider them money-saving form of entertainment?
