Here are 7 most important mathematical rules that can help you improve your money, career, and life as a whole:
Rule #1: 80/20 Rule or the Pareto Principle
Coined by Italian economist Vilfredo Pareto, the Pareto Principle simply says- roughly 80% of consequences come from 20% of causes. You can see this rule in place almost everywhere. 80% of a company’s profit comes from 20% of its products. 20% of the workers produce 80% of the output. 20% of the bugs cause 80% of the crashes and so on.
You can apply this rule to improve your life as well. For example, while investing in the stock market, don’t spend your time and effort to time the market. Instead, do the 20% right things that you can actually do, like- identify stocks that are revenue generating, profit-generating, have good cash flow, and should give you the desired outcome. Similarly, 20% of focused effort will produce 80% of the result.
Rule #2: The 21-90 Rule
Many of us want to develop new habits, for example, reading or writing, learning to code, working out in the morning, eating healthy, and so on. But chances are when you are working towards a goal like losing weight or learning a new instrument, you will be super active during the initial few days. After that, you will lose motivation and stop working towards your goal. That’s because sustaining a habit takes time.
The 21-90 rule is the magic formula for sustaining a habit. What it simply says is:
- Try to pursue an activity for 3 weeks or 21 days.
- For example, let’s say, you are trying to stay fit and decided that you will exercise every morning for 10 mins.
- Do it for 21 days. During that period, you will probably hate the activity. But just tell your brain that, it’s going to be a stressful activity but you will anyway do it for the next 21 days.
- After 21 days, that activity will turn into a habit.
- Once you pursue that habit for the next 90 days, in most cases, it will permanently become part of your lifestyle. It will turn into something that you will start to enjoy and not hate anymore. Now, that’s a big achievement.
Follow this 21-90 rule to turn any activity you hate, but is important for your life, into a habit.
Rule #3: Safety Net Rule
Many of us want to become entrepreneurs, start our businesses, leave our job and settle in some hill station, or we want to do something in our career that involves risk. Now, when you are taking some risk, you need to create 2 safety nets to make sure you are both financially and career-wise safe.
- Financial Safety Net
- Career Safety Net
Financial Safety Net:
You need to ensure you have saved at least 6x to 12x of your monthly expenses. For example, if your monthly expense is $1000, you must have saved at least $6000-$12000 in your emergency fund, before taking any drastic risk in your career. Things to remember here:
- Save 6 to 12 times your monthly expenses in your emergency fund.
- Keep some amount aside every month to reach this goal.
- Keep your emergency fund in your bank account or a fixed deposit. Don’t invest that money.
- Consider purchasing medical insurance to make sure you are secured in case of an emergency.
Career Safety Net:
You should aim to improve your skill sets to such an extent that if tomorrow you are fired from your job, there is something you can do to make money from the next day onwards. So, learn new skills, start experimenting with parallel sources of income, and look for passive income opportunities.
Rule #4: Don’t Boil the Ocean
In today’s world, there is so much information floating around. If you search for any topic on the internet, you will get thousands of resources. You can easily get overwhelmed by the overload of information.
This rule essentially says that- you don’t need to consume every piece of information out there to make better discussion. You don’t need to be an expert in every topic.
If you combine this rule with rule# 1 i.e. the 80/20 rule, what you essentially get is:
- Once you consume the important 20% of knowledge on a topic, you can make better discussions in most cases.
- Any more research is simply boiling the ocean. Try to avoid that, or else you will end up wasting a lot of your time.
Rule #5: Time >> Money
The value of your time is much greater than money. While there is no denying that money is important, you should not overvalue it. You can think about it this way- Money is almost infinite. The government keeps on printing money almost every year. All you have to do is to become eligible to earn it.
On the other hand, your time is finite. Make sure you utilise it to the fullest.
Rule #6: 8-8-8 Hours Rule for a balanced life
It is a personal time management rule that says- you should divide your day into three spheres:
- 8 hours of sleep
- 8 hours for work and
- 8 hours for pleasure and social activities
Managing your time this way will help you live a balanced life. While we all are busy working, taking care of others, and running around places, make sure to keep some time aside for you to heal. Adopting this formula in your life will do wonders for you.
Rule #7: The 2x Rule
We often get confused while deciding on purchases that are a pure expense. For example, whether you should upgrade to the latest iPhone, whether you should buy a new car, and so on. Just remember, if you can’t buy something twice, you should not buy it once.
If you are struggling so much with the purchasing discussion, you probably should not do it. If you can’t just go to an Apple Store and buy the latest one, you should not be taking up that expense.
However, you should not confuse expense with investment. If you are a content creator, the latest iPhone might help you make better content and earn more money. In that situation, it is no longer an expense, but an investment.
