Pareto Principle and Personal Finance

I was reading my newly-acquired favorite personal development blog and happened upon a post that talked about the 80/20 Rule, also known as Pareto's Principle. Steve Pavlina was discussing Pareto's Principle as it applies to personal development, but it got my brain working on how I could apply the Principle to my personal finances.

It's kind of ironic to use 80/20 analysis on my (capitalist) personal finances, given that Pareto's Principle was originally formulated by an Italian socialist who was philosophizing about the efficiency of a collectivist society, but it doesn't bother me too much.

Pareto's Principle states that 20% of the population control 80% of the money in a society. In personal finance, the Principle would suggest that 20% of my actions are responsible for 80% of my results. Similarly, in doing work, just 20% of my work gets 80% of the results that I want.

So, with regard to personal finance, which of all the stuff that I do is in the desirable 20% group and which is in the disposable 80% group? Here's a list of the stuff that falls into the 20% group:

• Quick, easy, semi-monthly budgeting
• Shopping at a less-expensive grocery store
• Automating our retirement account contributions
• Automating our long-term savings
• Shopping with a cash-rebate credit card

Here's a short list of personal finance actions that fall into the 80% group:

• Clipping coupons
• Balancing checkbooks
• Maintaining a checkbook register

Of course, the end goal of the Pareto Analysis is to do less of the less-useful "80% actions" and more of the "20% actions". With that goal in mind, I'm going to try to reduce my personal finance activities to a bare minimum and still get the same, or better, results.