Using Pareto's Principle (80:20 Rule) in the New Year

Mastering Time Management and Financial Decisions with Pareto's Principle

In this episode of the Bryan Foltice Behavioral Finance Podcast, Dr. Foltice returns after a hiatus to discuss the challenges of time management and financial decision-making, using Pareto's Principle (the 80/20 rule) as a guide. He shares his personal experiences from a demanding fall semester, reflects on the importance of focusing on high-impact activities, and offers actionable steps to improve time and financial management for the upcoming year. Dr. Foltice also emphasizes the benefits of passive index investing and minimizing distractions like email and smartphones to enhance productivity and financial well-being.

00:00 Introduction to the Podcast
00:44 New Year, New Topics: Time Management and Behavioral Finance
01:31 Personal Experiences and Challenges
06:02 Understanding Pareto's Principle
10:35 Applying Pareto's Principle to Time Management
12:33 Financial Decisions and Investments
15:01 Actionable Steps for Improvement
19:46 Conclusion and Final Thoughts

Transcript

Dr. Bryan Foltice: 0:04

Welcome to the Brian Foltis Behavioral Finance Podcast, where we unravel the mysteries of behavioral finance and unlock the secrets to making smarter, more informed decisions with your money. Now, here's your host, Dr. Brian Foltis. Welcome everybody to the Brian Foltis Behavioral Finance Podcast. Please don't forget to subscribe for more episodes and to check out my full mini courses on behavioral finance, and you can see them on udemy. com. E M Y or check me out at brianfoltis. com for all the information on these courses. Welcome today to 2025. We are going to get started this year on some topics around behaviors and behavioral finance that go around time management. Some of our biases around management and some of the constraints and then hopefully some ways to better manage our time and our lives. And we are back online now after a little hiatus. So I feel that this is a pretty good topic for me to be talking about. Not just for you to learn, but for me to learn and to apply to my life. So obviously it's been, I think about three months. Since I recorded last and my personal experience has been one of a finance professor where my Schedule ebbs and flows very significantly from season to season. That means when I am in summer mode there is endless time to work on content and new ideas and if I want to rest I can rest. There is literally nothing in my way. Emails become very quiet. Distractions, very minimal and it is a wonderful time to work on new ideas, new businesses, and to push a lot of these things forward. Once the flip switch flips, and this happens usually right about a week before classes begin, Email goes from zero to a hundred literally overnight. And from there, it just becomes what I call my email, just assess pool. It becomes a cesspool of total shit. And it's either volume, total volume just is constantly picking up or there are monster fires. And what I've noticed since becoming department chair of the finance, economics and risk and insurance department, the emails, when shit happens, suddenly come to me and sometimes it's an actionable step that actually I have to do something about or it's something that I'm just aware of and I have to keep it on my radar whether or not I have to step in or not is going to be determined later but at least it's on my radar in my email sitting there so anyway what I realized is September, October, I was getting annihilated just with all these different things and I knew it was coming. And I anticipated it, but I still don't feel like I handled it very well. And I'm not making excuses here to not do podcasts, but I was in that survival mode of just trying to keep my head above water. And at the same time, there were a lot of great things going on. So it's not like I was just getting pummeled doing my day to day. There was a lot of Money Strong presentations that I'll talk about later. Programming that we were working on. Grants that we were receiving. And I will tell you about next week when it becomes official. All of these wonderful things were going on. But what ended up happening was I just kept looking. Can I get to November? Can I get to November so that I can actually breathe and think about what the hell do I want to do with this podcast? And that's why we said, all right, just chill out. Let all these other things happen. Podcast will happen. And now. In my semester break, in between the fall and spring semester, I had a chance to sit back and reflect and make a decision here. Is this something that you actually want to continue to pursue or should we shut it down? I assessed everything and here are the things we want to keep going, here are the things to shut down. I'm here today and we are going to really push the podcast forward and anticipate trying to give this one more year to really get a lot of this content that I want to do. Get that out here, and then compliment that with some of the full courses that I have out online, and really spread the word about behavioral finance and do it in a comprehensive and legitimate. Way that I feel good about. So all that to say, here we are. And today all of this is going to lead to what I've been using in my world of sifting through good and bad it's called Pareto's principles. You might otherwise know this Pareto principle as the 80 20 rule. And this principle states that 80 percent of results often come from just 20 percent of efforts. 80 percent of the results come from just 20 percent of all efforts. You can also use this in a negative context as well. Where you might think that 80 percent of all of your issues or all the problems take place from just 20 percent of your job or your tasks that you're using. And so you can use this in a positive manner or you can use it in a negative way. And we're going to unpack Obviously I think the direction here is to optimize that positive results using that 20 percent and leaning in and making sure you're optimizing that 20%, putting your efforts more towards that, that drive your higher results and really trying to eliminate. Those negative 20 percent of your efforts that are leading to 80 percent of your troubles. But what I found interesting here, so I was looking into it is this came from an economist in Italy. His name was Vilfredo Pareto. So I have to say this with an Italian accent because being, having the last name Foltus and having my. Father's side, which is also all the look side of for better, for worse is comes from that side of the family where I could see myself just, I know what I'm going to look like in, in 2040, whatever years from now because I can see how my family looks and this Foltest came over from Italy and the bound out that My last name used to be Fultico. And and so when they came over to the U S in New York, they just said, I don't know how to pronounce it or say it. So they just said Fultus. And now just a few generations later, you can see they're just not any other Fulti. Fultus is around and so there's, you look it up. There's only one Brian Fultus and it's a unique name. You can't go back and find it in Italy. I do remember thinking I was in the Dusseldorf airport a few years ago. I was flying to Florence for a conference and I was sitting at gate 67. I heard over the loudspeaker. That Brian and he said it in this Italian accent. I'll never forget it. Cause I finally heard my last name pronounced probably the way it's supposed to be in an Italian that I was supposed to be at gate 67, a, which was downstairs. So anyway, as nice as it was, I had to run up and make my flight very last minute. And so anyway, it comes from a, an Italian economist. And what he basically found was that in Italy. 80 percent of the land was owned by 20 percent of the population. So that was really the humble findings here. And you can find it in all different contexts though, where you'll see in businesses, 80 percent sales come from 20 percent of their customers. 20 percent of your tasks that you're doing in your work or in your life, create 80 percent of your impact. And we're also going to bring this into our finances as well. Where. Macro level, we find that 80 percent of assets are owned by less than 20 percent of the people, but we're also going to look at our own finances and think about what least effort are driving most results in our personal finances as well. So when we think about here, our 80 20 rule in our lives. I want you to think about what that looks like for you and in your time management. So once again, I've already explained at length here what happened in my fall semester, and I think the really important thing here is to really sift through and to go, okay. I barely put any effort into some of this money strong programming, but the results that we had from it were astounding and things fell into my lap. Serendipitous things happened. This is definitely a Pareto's principle working in my favor. At the same time, when I find myself stewing over my email, And spending an inordinate amount of time going over emails and keeping it. Keeping my email open and letting the drip happen. The bombardment of emails trickle in and I react to it every time I'm sending myself up for a negative Pareto's principle, where 80 percent of my issues are going to come from 20 percent of my time. And these are some of the issues that pop up. And one thing that I'm learning in a time management standpoint. Is, man, if I can keep emails at bay and check it at certain amount of times and then make sure that I shut down the email, then I can control when I want to deal with it and when I can turn it off and move into other aspects. So from a time management standpoint, that gives me. A whole different amount of control where I can focus my efforts into those positive results in those positive categories, financial decisions. This is the good time here at the beginning of the year to look over your expenses. What did we do well? What can we improve on? And I'm actually going to do a whole nother podcast on some of these personal finance issues. We can really jump into that, but from a financial decision standpoint, we know that 80 percent of our expenses usually come from no less than 20 percent of our spending categories. We can definitely look into that and see, are there any pain points here or room for improvement where I'm not getting fulfillment or enjoyment from these expenses? Or conversely, I can add more to a category because I am getting fulfillment and enjoyment from this. And so we really, when we're talking about our financial plans and our budgets we're really going to look at it from that standpoint, not from a negative standpoint, but just from an overall, can we just lay this out in a way? We can just see and control and not be emotional around it. Cause many times we create this thing as a very negative and debilitating mechanism. And it really shouldn't be that way. And since we're talking about our money decisions, we should also include investing into this category as this can be something that we really overthink and we try to overanalyze and really make it more complicated than it really is. Needs to be. And what I mean by that broadly speaking is trying to think about index investing over passive investing. When I think about how much time I spend trying to look at different stocks and analyze stocks and market timing and all these different things, luckily it's my job and I get paid for a lot of that as an investor though, it just makes sense to. Put it into an index fund. That means put it in the VOO, VTI. These are the Vanguard overall market. ETFs or S& P 500 ETFs, where you can basically set it and forget it. And those returns emulate the overall stock market or the S& P 500. Let's bring this now into. Some actionable steps. So what can you do here? It's the beginning of the year, and this is a good time to really take some inventory and to reflect on where your time is going and where your money is going. Take a look, reflect, try to assess. And from a time standpoint, that's what I was trying to do. And I'm very grateful because I've been able to look at. Getting my ass kicked in the fall semester and see it now through a lens of, okay, that's going to happen again next fall or, and that's going to happen again here in the spring semester. What can I do to improve? And what can I learn from this? Because at the end of the day, I want to improve my I want to improve my organization and my time management. And so what am I going to take away from this? That makes me better because I'm not going to sit here anymore and make excuses or think about what was me. In this area anymore, and so this is where I really had to take a look and I've already said email man If I can clean that out, I will come back one time later in the day and take a peek Anything that needs to happen If it's not urgent, it'll come back. I will open it up the next day and we'll be ready for it. Otherwise I'm cleaning it out and I'm going to leave email out of my life. And as important as I really think I am, there is nothing in my email that has been overly urgent that Can't wait. And I know that Dean Caldwell and some of my other colleagues, if they need me, they have my phone number. They can reach me on my cell phone. They can always text me and I can still keep my time in my priorities because I want to create more content and I want to have free mental space to be able to do that and not be bogged down by it. Minor emails, investing. I'm going to listen to my own advice. I want to be index investor over any activity, any stock picking, any market timing, just be the market and do something else with your life. And that's what I tell my students. If they have money to invest, put it in. A broad market ETF and they start pushing back and they say what about industries? What about sectors and different things? Once again, you can take this as far as you want or make it as complicated as you want. But the most optimal way to go with the least amount of mental effort is put it in the broad market and leave it alone. And then we have this iPhone and that's where you go, man, we're doing so good. I got email at bay. My investing is set it and forget it. And then you have this phone. And if we can have some control over this cell phone of ours, then we are truly going to win. Because I can create all day between emails to have to myself, but if I'm going to be consumed by Instagram Reels, or whatever the hell I'm doing on my phone, then it's all for naught. So I really have to be cognizant of time. Keeping the phone away or keep keeping it out of my purview. And what I'm doing here is I actually have every day is a good day for a spreadsheet. So I actually made a spreadsheet cause I was curious where my time was going and that actually keeps me on task because I say, Oh, I'm supposed to be doing behavioral finance content for this amount of time. I shouldn't be distracted. Or if I do, I have to turn it off. My. Program of timekeeping, turn it back on. So anyway, these are the things I'm working on in my own life. What about you? What are you working on? To cut out or to add to. And what I do this with a way, I'm not trying to be perfect. I'm just trying to continuously improve productivity, my own output, understanding we all have 24 days or 24 hours in a day. And these are some of the practical steps that I'm trying to use. But what do you think? What are some of the things that you're working on? I would love to hear from you. And if you've made it this far, thank you so much for listening and to tuning in. Please share. What you're doing and also come check me out on brianfoltis. com, Brian Foltis at Instagram and Facebook. And please don't forget to subscribe, leave a review if you've actually made it this far and have enjoyed this episode. Thanks so much. And we'll see you on the next episode. Have a great day. Thank you for tuning in to another episode of the Brian Foltis behavioral finance podcast. We hope you found our exploration into the fascinating world of human behavior and finance, both enlightening and thought provoking. Be sure to subscribe for future episodes. And until next time, stay curious and financially savvy.