To Pareto and Beyond
Posted by Jason Henrichs on August 10, 2010 in PerkStreet Posts, Personal Finance, Staff Stories
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Have you heard of Pareto? How about his (in)famous principal better known as the rule of 80-20? The concept is simple: 80% of consequences come from 20% of actions. Brad Feld, another (in)famous innovator, investor and blogger extraordinaire, has his own take on Pareto as it relates to online communities. Building on the thoughts of some others, his take is that 1% of the population actively takes action, 19% are interested but not fully engaged and 80% are disinterested or oblivious.
Having known Brad for a while, I’ve been ripping off the basic concept for years, typically when talking about Personal Financial Management or financial literacy. I believe 1% of Americans actively take action, 19% care but take action sporadically, and 80% prefer to put it on a credit card with the belief they’ll figure it out later.
I’ll admit right now that I’m in the 19%. It’s not that I don’t care. I care, but I’ve gotten by with a general philosophy that I put money into my savings and retirement accounts first and then live on the rest. As a single guy, it worked pretty well. That’s about to change; I’m getting married in a little over a month so the single guy’s approach is about to get more complicated.
I recently reread Dave Ramsey’s Total Money Makeover and realized I’ve done OK, but I could do a whole lot better if I joined the 1%. We are implementing many of the excellent tips and comments from Susan Johnston’s post and we’ve decided marriage is a good time to upgrade our financial life as well as our towels. I’m committing here that before we get married, we’ll have a monthly budget in place.
Are you part of the 1% or the 19%? What holds you back from being part of the 1%?
I’ve got 40 days to get into the 1%; what are you going to do in the next 40 days?
Jennifer’s note: I made these graphs using Create A Graph. Ridiculously easy, and free. I’m just saying.
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CouponShelle
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Jason Henrichs
