Pareto Principle and Savings

Everyone has heard the 80-20 rule at some point in their careers, where 80% of the work is done by 20% of the people.

How about applying that to your financial plan?

Save 20% every year and live off only 80%.

Let that 20% work for you for your retirement.

Many times I’m asked what my rich clients did to get that way. Invariably I say that the majority spent less than they made, saved it, and invested wisely.

Pareto Principle and Savings

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The Dow Jones Industrial Average is an unmanaged, price-weighted index of 30 large capitalization stocks with dividends reinvested.

The Standard & Poor’s 500 Index (“S&P 500”) is an unmanaged, market capitalization weighted index of 500 widely held stocks, with dividends reinvested, and is often used as a proxy for the stock market.

The Nasdaq Composite is an unmanaged, market capitalization weighted index of stocks listed on the Nasdaq Stock Exchange, and are reported as price return without reinvestment of dividends.

Indexes are often used as a proxy for the stock market and cannot be invested in directly.