80 20 Rule

The 80 20 Rule was first described by the Italian Economist of the 18th Century, Vilfredo Pareto.

So What is the 80 20 Rule?

Well, according to Pareto, 80% of the total effects come from 20% of the causes only. Say for Example, 80% of any Business revenue comes from 20% of clients ir customers only, 80% of your total happiness comes from 20% of your relations only and so on…..

But when it comes to Wealth (Money), This law badly applies. According to this law, 20% of the people of this world own 80% of the wealth & rest of the 80% people share just 20% of the wealth.

You will say that, it is injustice. How can 20% people of this earth own 80% of the total wealth & rest of the 80% share just 20% of the wealth? Well, it may sound injustice to you but this law is true for wealth also. In fact, in countries like India, only 1% people own 90 % of the total wealth and rest 99% people share just 10% of the wealth.

Why So? What is the Maths behind 80 20 Rule?

Well, so many economists and authors tried to explain that, how the rule of 80 20 applies to wealth? But none of them has given satisfactorily explanation. I have read several books on the 80 20 rule but there is only one book which has given the satisfactory reason.

The book is Living the 80 20 way by Richard Koch (In Photo). Chapter 6 of the book “Unmask the Mystery of Money” has given the excellent mathematical explanation of why this principal applies to the wealth also.

According to Richard Koch, It is the Compound interest because of which the wealth is concentrated in few hands only. According to Albert Einstein, the compound interest is the greatest force in the universe. According to Richard, if you acquire any Asset (Stock, Bond, Gold, Real Estate, Art, Businesses, Antiques or anything else) than the valuation of that asset will increase cpmpoundly. And that’s why the wealth is being concentrated in few hands.

So if you want to put your self in those 20% of this world, who own 80% of the total wealth, then you have to simply spend your life behind acquiring assets. You have to start investing as early as possible in your life means now and you should become an ultra-long term investor.

If you never invest your money, the compound interest will never work for you an you can be never rich. So to become rich, you must have to make compound interest work for you and that you can do only by investing your money…!!!

So Start Savings & Investing Now….!!!