Budgets, Sixx Design and the 80-20 Rule

by Lindy on March 12, 2012

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Recently I’ve been thinking a lot about the 80-20 rule.

If you’re unfamiliar, the 80-20 rule, also known as the Pareto principle, states that 80% of your results should come from 20% of your efforts.

There are a lot of uses for this principle, but the way I like to interpret it is go for the big wins. Find that key process that produces the most results, focus the bulk of your energy there, and find ways to minimize or automate the rest.

Being a visual person, the most relevant example of the 80-20 rule came to me one day while I was watching HGTV.

Have you heard of Home by Novogratz?

Novogratz Family

Robert and Cortney Novogratz are Manhattan home renovators and designers who run the firm, Sixx Design. I first learned of them when Bravo aired a reality show about their family, called 9 by Design. On top of managing a successful business, their own television show on HGTV, and being incredibly cute and hip, they also have seven freaking kids.

But after watching one 30 minute episode, it’s easy to see how they make it all work. They are experts in practicing the 80-20 rule.

In their designs they go for big and bold and let the rest of the room play a minimalist supporting role. Huge art. Graphic wallpaper. A fabulous mirror. A killer rug.

Novogratz Room

They don’t spend time futzing with tchotchkies, simply the big wins.

Not only do they practice the 80-20 rule in their designs, but also in their family life. On the Bravo show, when asked how she manages to throw birthday parties for her kids on top of her busy career, Cortney said something along the lines of “it’s easy, just make a f**king cake and invite a ton of kids.”

My idols, these two are.

Being a working mom, and a mom trying to make money on the side, I’m always looking for ways to incorporate more of the 80-20 rule in my life.

So what does all this have to do with budgeting?

Lately I’ve been noticing one activity that has been taking up too much time, and producing too little results is tracking our spending.

We I’ve been categorizing our expenses with Mint for about two years now. Though in the early days I was more zealous about it, the process has always been a chore. It tends to be something I put off to the end of the month until those uncategorized transactions pile up so high, I need a good 1 -2 hours to sit down and balance it all.

In the beginning I was motivated to make the extra effort not only to see what we were spending our money on, but also to see if we were spending less than what we earned each month.

But then the months went by, and the amounts seemed to be about the same each time, and the whole process became less intriguing. We consistently spent X amount on groceries, and Y amount on gas, and yadda, yadda, yadda.

Don’t get me wrong, tracking our expenses has helped us make some good adjustments. It helped us see that our eating out habit needed a makeover, for one.

But part of me also feels like it hasn’t done much for us lately, which is why I haven’t done it for the last three months.

Maybe tracking our spending was a big win in the early days, but now it’s more of a mundane nuisance. Maybe now we turn to phase two: check in only once in a while, or if we have too many overdrafts.

Do you track your expenses? Have you done it for a long time? Has it become mundane, or is it still of value to you? Do you have another method?

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  • My biggest Pareto inspired win came from automating first my debt repayments and now my mortgage overpayments.

    NO more shuffling little bits and penny pinching – I get paid and the money automatically gets turfed into my “Freedom Fund” and I can’t do much damage with the little that’s left.

    Means I now concentrate on “upping the income” rather than “juggling the pennies”

    180 degree change in daily focus

    • Lindy

      Your method sounds very clean. Way to go with 80/20!

  • My bank tracks my spending for me, so I just log in at the end of the month and make sure nothing seems ridiculously out of whack. That said, it’s been a LONG time since I’ve really paid much attention. For the most part, I’ve conquered my spending addiction – when I spend, I know I either (a) need it or (b) can afford it without using a credit card.

    I think once people get used to their habits and get spending down to manageable limits, it’s not as necessary to track. It’s still good to pay attention, but the hours and hours I used to spend in the beginning? Pfft. I have more important things to do, and I’m grateful that I can finally say that.

  • I track my expenses sometimes. Not always down to the last penny, but I do track my spending. I find it mundane, but sometimes I do sort of realize how much I’m spending on useless things and it helps me refocus myself.

  • Generally no, though every month I compare our expenses as a whole to our income as a whole (so I know if we’re on track to survive the unpaid summer)… but yesterday I calculated our net worth. It makes me feel more comfortable about potential big change to look at what we’ve accumulated so far (we’re going to be ok).

    • Lindy

      Glad to hear your net worth calculations made you feel better! I know that’s not often the case with some.

  • We track our expenses. My husband and I are still pretty new to both doing it at the same time. I’ve been tracking for over a year and he joined me on it last June.

    It doesn’t take that much time for us. We use an app that we both have installed on our iPods. We just add in anything we buy same day we buy it.

    We are reformed spenders so I think we’ll be tracking for a few more years. I would also like to do some work cutting back on a few areas short term, like no eating out for a month, cut casual spending in half, to see if we could save a bit in the short term to fund a weekend getaway.

    • Lindy

      It’s great that you are both on board with the tracking. Staying on top of those transactions and not letting them pile up is also a great way to manage it.

  • I’ve gotten a lot more lax about tracking my spending lately, which has led to some ugly situations. I definitely need to get back into it. But when I was doing it diligently, I was amazed at how much we were spending in some areas.

    I think I might like these design people. I can’t stand too many tchotchkies.

    • Lindy

      It can definitely be eye opening.

  • I’ve been tracking my spending for 5 years, going on 2 with Mint. I still find value in it, partially as insurance.

    Two suggestions if you do want to continue tracking with Mint:
    1) Log in every day. I bet you would spend less than 2 minutes on the site categorizing that day’s expenses if you didn’t let it pile up.
    2) Make rules. Every time you re-categorize, Mint gives you the option of making that re-categorization automatic.

    If you’re really not getting anything out of tracking and it’s taking a ton of time and your situation is stable… then I guess it’s not worth it? Our spending doesn’t change much month-to-month either and what keeps me tracking is that if we ever do wake up and realize something has gone off, we have the tracking data to work with instead of having to start over with that month or comb through our past credit card statements.

    • Lindy

      Thank you for the tips! I recently discovered the rules bit and that helped speed up the process tremendously.

      I’ve also considered stripping off all of our accounts except the one we do our direct spending from. That way we wouldn’t be seeing duplicate transfers and credit card payments that don’t really matter in the course of things.

      As for logging in every day, it gets a little complicated when my husband and I share an account. I know what I spend, but it’s often difficult to tell what his expenses were without doing a Google search for the address and making an educated guess. Not that it can’t be done, it just adds to the time-factor.

  • I was more dilligent last year at tracking our spending; 3 months into the new year and I have been less than enthused. I suppose I need to do it, but it sounds so boring and time consuming…. *Sigh*

    • Lindy

      What is it about those new years? Christmas must have knocked the wind out of us.

  • I’m a Quicken user from waaaaaay back and I track everything. It’s really just my personality. I need to balance the checkbook down to the penny each month and I get real satisfaction from doing it. I agree with your philosophy on big wins, though. And we don’t really budget. We make sure the big stuff is taken care of and then let the little things fall where they will.

    • Lindy

      We are the kings of letting little things fall where they will…perhaps a little too much!

  • I’ve been working on applying this principle to most of my life: 80% of the time I’m wearing only 20% of my closet, so let’s declutter. 80% of my work money comes from 20% of my clients, how do I make those relationships work for me? If you find that you’re spending 80% effort and only getting 20% out of it, then it’s backwards.

    • Lindy

      80/20 has always come naturally to me in my school and work lives. Home and entrepreneurial are different stories, however. I like your example of decluttering, makes total sense to me!

  • I am grudgingly tracking my expenses… I hate it, but I’m doing it.

    I LOVE the 80/20 rule. I’m not all that good at practicing it in all aspects of my life, but I’m definitely trying!

  • Lusule

    Here in the UK we don’t have Mint (I’m not sure I’d be comfortable with having accounts in the cloud anyway), and banks don’t let you automatically download data into finance apps.

    I still track everything though, downloading statements manually every week into a fantastic app called Moneywell (available on the mac app store) which makes it really easy to split your money up into categories and set a budget, not so much so that you can see where you have been spending but so that you can see where you can afford to spend – no room left in the eating out budget this month? Then I guess we’re staying in! A companion iPhone app really helps with this.

    Another much simpler version is an iPhone app called ‘left to spend’ where you simply calculate how much money you have left each month after expenses, divide it by 31 and plug that into the app. The app will then add that amount to your total each day, and you stick in a number every time you spend something – no categories, no details, just the amount, which gets subtracted from the total. The trick is not to go negative (and remember to leave £100 for groceries at the end of the week).

    • Lindy

      Oooh. Great app recommendations. I’ll have to check these out. Thanks!

  • I still track using mint all the time, though like you I dont check it 18 times per day anymore (which I realized was senseless, because I didnt spend money, but would check anyway).
    One of the ways it has helped me and why I still do it is because I can see where I had past slip-ups or times where I spent a lot of money – I can go back, think about what else was going on, then prepare for the next time. For example when I leave town, I usually just slack off on food shopping and eat out the Whole week, but I noticed that in mint and didnt let that happen for my upcoming trip;

    • Lindy

      That makes sense. I do feel there is still value in it for our lives too. It’s just a matter of figuring out how to make it less time-intensive.

  • I still track everything – I have control issues lol!

    I do use the 80/20 rule in the kitchen though- 20 cooking/80 hoping for the best!!

    Love this couple, love their design ideas – I have their book and dream of living in their (old) NY house!

    • Lindy

      Your 80/20 kitchen rule sounds A LOT like mine!!

  • I still track my expenses, both on a spreadsheet and mint.com. I’ve never found mint to be tedious because I charge everything, but if you spend a lot of cash, I could see that getting old quickly. I try to update my manual spreadsheet at least every 2-3 days–it soothes me.

    • Lindy

      We don’t use a lot of cash (and if we do, we don’t count it in our budget, shhh). Checking the account every few days sounds like a great way to stay on top of things. Unfortunately, I don’t get the same soothing effect ;)

  • When I began getting out of debt I was obsessed with tracking my expenses. That was over 6 years ago and these days I know what I spend and I rarely go outside my budget so I don’t find the need to track my spending. If I saw that my expenses were unexpectedly creeping up I would probably start again just to bring things back under control.

  • I track my expenses using excel. I’m thinking about trying mint, but for now excel is what’s comfortable. Luckily my expenses don’t vary that much from month to month so it’s easy to fill everything out. I also make little graphs and pie charts using excel-I’m a nerd.

  • I love the comment about baking an effing cake and inviting a ton of kids — that sounds like a great way to handle a b-day party to me!

    For our budget, I’d say I track 80% and don’t look too closely at 20%. I’m in the same boat as you: I consistently spend the same amount on groceries, gas, etc.

  • I stopped keeping track of expenses last year. I did it again in January for a sanity check, and we were OK with the same patterns. If anything, we’re saving more.

  • I was pretty vigilant about tracking expenses when we were paying down the mortgage, but once I put some rules in place that helped me minimize my spending..like just asking myself “can this purchase wait?”, it wasn’t long before I was in autopilot mode. I haven’t done a proper look at my budget in over a year, but I’m still saving money.

    These days I do broad brush guidelines for savings and spending and it comes in close enough. It also helps that I’ve replaced everything in our house already so those unexpected, oh crap the washer broke, expenses are few and far between these days.

    I think once you have an awareness of your spending habits and weak spots and put the proper controls in place, then it’s okay to losen the grip on the spreadsheet.

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