To be brief, the Pareto principle basically states that about 80% of the effects from from about 20% of the causes. What this means in terms of money is that making money isn’t about grinding. It isn’t about hustling. It isn’t about working a 12-hour day each day. It isn’t about monitoring your email like a hawk so one never slips through the cracks. It isn’t about making sure your LinkedIn profile stays perfectly up-to-date. Rather, the Pareto principle teaches us to focus on what actually matters.

Think about it like this.

You wake up at 4 AM and work diligently all day long. You’re on top of emails, you network, you get every single task checked off of your list. It’s now 6 PM. You feel accomplished.

Meanwhile, your competitor woke up at 7 AM and stopped working at 10 AM to collect his Ferrari 458 from the dealership. Why does he have a Ferrari and you’re still driving your mom’s Saturn? It’s because he harnesses the power of the Pareto principle.

He understands that just a small fraction of our work truly matters. And he has found what the important 20% is and he focuses his energy on that 20%.

While you were busy toiling away at the desk, he stopped to think. He thought about the day long and hard. He knew his best work came from those in a bind. He remembered seeing on Twitter that a fellow freelancer who he knows often overworks himself (he is not familiar with Pareto) and has fallen ill. He DM’s him and offers to lend a hand. He gets the gig that the sick freelancer has that is the most important. Because of that, the freelancer offers a large sum for work that can be done quickly. Once finished, the savvy Pareto-loving freelancer heads to the Ferrari dealership.

He Who Works Hardest Is Rarely the Most Successful

Being successful does take hard work. But if you only focus on working hard, that won’t get you far. Think about it like this. I actually used this metaphor with someone recently who thought doing laundry was an excuse not to be working…

I have a jar of change. Thousands of coins. I take off the lid and toss the coins all over the room. Behind furniture, under furniture, on top of the desks, everywhere. Now it’s your job to pick them up. Is it work? Yes. Does is positively impact your life in any way shape or form? Absolutely not.

It’s important to work on what matters. Don’t work just for the sake of breaking a sweat.

My Early Days as a Freelancer

I grew up on a farm where sweating was a sign of success. It wasn’t a concern why you were sweating – just that you were sweating. I took this mentality into my freelancing work. This is what happened:

One day, I felt really accomplished. I had worked so hard all day. Then it hit me. I hadn’t made a dime! The point of freelancing is to make money, is it not?! Now I focus on strategy. I find the 20% and do those things. Then I can even justify working less.

Slow Is Smooth and Smooth Is Fast

Warren Buffett describes his energy at work to be borderline lethargic. I heard a story from the owner of an advertising company. One of his employees was sitting in his office staring at the wall for weeks on end. His colleagues finally got peeved and said something to the owner. They were mad because they said the guy wasn’t doing anything. What boss told the angry colleagues to do was get the lazy man coffee. Run errands for him. Do whatever he needs done.

Why? Because the boss said that the last time the guy got into a trance like that, he brought a multi-million dollar idea to the agency. That man knew the Pareto principle. He knew to slow down and focus on what mattered most. Focus. Not flurry.

Where if Your Time Best Spent?

Instead of flurrying, try focusing. Once you know where your time is best spent, you can work less and earn more. Live the 80/20 way.


William Lipovsky owns the personal finance website First Quarter Finance. His most embarrassing moment was telling a Microsoft executive, "I'll just Google it."

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