How I use the 80/20 principle at university

I was just surfing a forum and found a question from someone asking how individuals are using the 80/20 principle while undertaking tertiary study to achieve their desired results at university. 

Below is a list of a few quick tips I listed in response.

1: Study in an area you are passionate about: 

I am studying a Bachelor of Business Entrepreneurship at RMIT (I live in Australia). 

This university can potentially allow me to travel overseas, and has some international links. 

Studying this course is in relation to my passion, not something I chose at random. 

Pick what suits your abilities, passion and strengths.

2: Learn how to develop report templates: 

Essentially I use one of two templates styles I have created for all of my reports, just changing the headings and then updating the headings in the Table Of Contents (Note: If you set this up right, it should take 30 seconds).

3: Always be the group leader: 

Learn to delegate out to others. 

Use the above mentioned template, allocate word limits to each section and pass the sections off to people based on their strengths (so they can use 80/20).

4: Get a job with a lecturer or in relation to your study: 

I now work for one of the many businesses run by my lecturer. 

In the first six weeks I managed to obtain an 11% pay rise. 

The benefit to me is that I gain experience in my field while learning in a practical environment... and also getting paid for it at the same time.

5: Apply for any credit transfers

If possible (don't study unless you have to; it costs time and money, both which students have little of).

6: Create a time line for your assessment deadlines and percentage marks for each in excel: 

Eliminate the unnecessary and track the progress weekly/ fortnightly, etc.

7: Don't practice presentations: 

Whip up a powerpoint (one line dot points) and present impromptu. 

Much better results and minimal effort, while ensuring the content is fresh in your mind and not stale.

How are you using the 80/20 principle to maximize your study (or your work, etc.)?

Investing in Yourself

What are some of the ways you can invest in yourself? 

There are several but they generally have to do achieving one of the following objectives:
  1. Teach you a new skill.
  2. Improve your health.
  3. Improve your finances.
  4. Improve your spirit.
  5. Make you feel more confident (long term).
  6. Improve employment opportunities.
Some examples that meet the above requirements are the following:
  • Buying new clothes.
  • Going to university.
  • Going to a TAFE or Junior College.
  • Going to the gym or a pool.
  • Playing a sport.
  • Going to church.
  • Taking a home study course.
There are many more but I think these help to get the point across. 

Investing in yourself is good if it:
  1. Does not get you into debt.
  2. Improves your quality of life in some way.
I am not talking about justifying the purchase of a new car because you believe you will be able to get a better job or will feel more socially accepted. 

You know the truth and what is really going to make a long-term benefit in your life. 

Be frugal with your living expenses but don't hesitate to make a permanent habit of investing in yourself.

Wealth Pillar Eight: Making a contribution

You don't have to look far to see that high profile celebrities and millionaires are always contributing to society. 

While it may not be publicized, many of them believe in the importance of the redistribution of wealth and helping others to achieve success.

Contribution to the world can be done in many ways if you are wealthy. Some of the main ones are listed here.

Contribution of Money

Obviously this is the one that receives the most controversy.

Many people complain that the rich don't share their money or use it to help the world. 

Without taking a stance on the argument I would like to point out two things:
  1. A lot of rich people give money to charities, religious institutions and organizations privately (and do not make a public display of it).
  2. Giving money can be a great way to help the world.
Most rich people follow a 'tithing' style of giving where they give 'at least' 10% of their income (usually more). 

Contribution of Time

As your wealth increases, you may find you have more free time thanks to a passive income. 

This time could be spent helping charitable organizations, mentoring individuals on how to become successful business owners and investors or helping serve in some way.

Contribution of Knowledge

If you manage to implement these Eight Wealth Pillars and become successful along the way, then you will no doubt have a level of knowledge in business, investing and personal finance from which others could benefit. 

You can be generous and make a contribution by writing a book, teaching people at seminars or a university or college, or by publishing a blog.

Contribution of Spirit

Many people have a spiritual or religious life. 

Some of these circles would love extra participants to help with things they are doing. However, that is not what I am talking about when I say the contribution of spirit.

A lot of people have had their personal spirit and belief in themselves crushed. 

This may result from a number of circumstances. 

Being able to contribute in a way that builds their spirit and helps them to gain confidence in themselves again is an excellent way to contribute to society.

How you contribute to society is up to you. 

The important thing to note is that as a wealthy individual you have a responsibility to help others in a way that plays to your strengths.

Remember to visit each of these pillars from time to time, as you continue along your wealth journey.

Wealth Pillar Seven: Increase your earning ability

Increasing your earning ability is one of the most important pillars, as it can dramatically boost your results in all the others. 

While everyone focuses on passive income as a goal, if you can increase your ability to earn you will progress a lot faster.

Usually you can receive a little more by giving a little more.

How you can increase your earning ability

If you want to increase your ability to earn, there are a number of things you can do. 

While asking for a pay raise might be one of them, you have a far better chance to earn if you give more of yourself or if you have more value to contribute.

The following points are ways to potentially increase your income (both short term and long term):

  • Work overtime.
  • Work on public holidays.
  • Volunteer to take on extra responsibility or education.
  • Go to university, TAFE, junior college or college and get qualified.
  • Find ways to make the company earn more (or spend less).
  • Do more than you are paid to do.
  • Go for a promotion.
  • Develop skills in new aspects of the business.
  • Provide solutions to problems
  • Develop material/products/services/ideas that are beneficial to the company.
There are many others, including working for yourself. The main thing is to find out what will work in your particular situation to increase your earning ability, and then to focus on doing that.

What are the benefits of an increased earning ability?

There are many benefits, some contrary to the perception in society. A few of the benefits are listed as follows:
  1. Helps you to build your savings faster.
  2. Have more income to spend.
  3. Less competition for your services in a higher position.
  4. You become more valuable to the company.
  5. More satisfying work.
  6. More chance for seeing and being spotted by other opportunities.
  7. More chances to learn.
What have you done, are you doing or can you do to increase your ability to earn?

Wealth Pillar Six: Develop a future income

Will you have a sufficient income level when you retire?

This is a question many people are considering in the current climate as share prices fall, superannuation returns drop and employment has diminished. 

Being able to retire not only with enough money to live, but with an income that will support the lifestyle you dream of is a critical aspect of your wealth creation plan.

How you can ensure a future income.

There is a number of ways to begin to ensure an income for your future. 

This can include businesses that provide a passive income for minimal time investment, rent from real estate, dividends from share investments, royalties from music created, etc. 

The list is huge, but the important thing is to start while there is time left to get the wheels in motion.

The importance of multiple income streams in retirement

As the recent economic climate has shown, it is best for an individual not to solely rely on one source of income in retirement (and during working years for that matter). 

As retirement is increasingly becoming a worst-case scenario, ideally you should look for a way to enjoy your life while preparing to increase income streams as you go along.

An example of this might be as follows:

Joe Brown has recently graduated from university with a Bachelor of Business Management. He obtains a job as a trainee executive on $45,000 a year. 

From this income, Joe begins to save 10% of his pre-tax income a year ($4,500). He intends to invest $4,500 a year for the next 39 years (until age 60) with a return of at least 8.00% per annum.

Assuming Joe does this, and assuming his returns net as planned, by age 60 he will have have $1,165,754.33 in his investments. 

If he keeps it in the current investments he will have a passive income of $93,260.35 a year to live on past the age of 60. This is the first future income stream.

Joe works hard at his job and manages to receive multiple promotions and from 21-31 begins to become recognised as an expert in his field. 

His income has increased to $80,000 per annum so he invests some of his money (which he has saved as he has budgeted his expenses rather than increasing his lifestyle) into an investment property that produces a positive cash flow

He uses this positive cash flow to pay down the principle on the loan. 

This will then become a second income stream (either through rent once the loan is paid off or sale of the property for a capital gain).

Now being an expert in management, Joe starts out as a management consultant in his free time and develops some material which he turns into a CD and a manual. 

He then sets up a site selling his consulting services and his product. 

Being a savvy marketer, Joe manages to set up his site to a point where he gets three hours of management consulting work a week in his spare time at $100 an hour ($300 a week), and sells his product on the site which produces an additional $500 a week (profit).  This is his third income stream.

Joe also begins to max out his superannuation account and sets this up as a fourth income stream. 

As you can see, Joe is slowly building himself an empire which will continue to produce him an income even while he is not there. This will help him to have a secure future in retirement.

How you go about this process of setting up multiple income streams is entirely up to you, however I would recommend the following two suggestions:

  1. Get educated regarding business and investing: There are many people who will happily take your money from you and prevent you from seeing it again. Study and make wise decisions regarding your money.
  2. Find a mentor: find someone who has done what you intend to do and learn as much as possible from them. And don't be afraid to show your appreciation for their help, whether it is by paying for their meal, getting them tickets to their favorite sporting event, etc

Wealth Pillar Five: Make your home an asset

There are three ways that entrepreneurs, investors, etc. commonly view as ways to make their home an asset. They are as follows:
  1. Buy a house outright/pay off your loan ASAP.
  2. Don't buy a house, rent and invest the difference + deposit.
  3. Don't buy, travel abroad and live in luxury on lower expenses, then invest the difference.
All three have their benefits and impositions, but they are all viable.

1. Buy a house outright or pay off your loan ASAP

The theory of this principle is that if you buy a house with cash, or pay off your loan ASAP, that you will be saving money in loan repayments and rent, which can then be allocated to investment. 

These days this option is quite hard, due to the high price of housing and the high deposit required. 

It can be beneficial, but in my personal opinion, is not the best option for undertaking this wealth pillar.

2. Don't buy a house, rent and invest the difference + deposit.

Buying a house requires a high deposit (usually around 20% of the purchase price). 

This money could alternatively be invested over the life of the loan and make a significant difference to your investment portfolio, far beyond the amount the house will appreciate in that time. 

Even if renting costs more than the weekly repayments associated with buying, the difference is still usually dramatic enough to justify renting. 

In the current economic environment however, renting is usually much cheaper than principle and interest loan repayments.
3. Don't buy, travel abroad and live in luxury on lower expenses, then invest the difference.

If you are able to find employment as a telecommuter or if you are able to start a business that has a global perspective and can be operated without you being tied down to a single working location, you can begin to travel abroad, where expenses are a lot less. 

Tim Ferriss, author of the four hour work week says that while he was travelling and living in different countries for 15 months, he saved thousands that would have been spent on living in the United States. This excess (aka spread between living costs in other countries vs your home country) can then be invested to create a difference.

Whatever decision you make, the important thing is to make a decision that will benefit you and your goals in the long term. 

But don't compromise the first four pillars to do the fifth, build your Wealth one Pillar at a time!

Wealth Pillar Four: Protect yourself from losses

You need to be able to protect the wealth you establish from loss. There are many ways you can lose wealth that is starting to build including:
  • Spending it before you can live off the interest.
  • Investing in areas in which you have no knowledge, leading to bad decisions.
  • Not having the correct investment structures to protect your assets from lawsuits and other threats.
  • Not having any required or viable insurance.
Wealth Pillar four is to protect your investments from losses. The best way to do this is to seek professional advice from a solicitor and an accountant, as well as having a mentor to guide you through the process.

What are you risking by not protecting yourself? 

Do the costs outweigh the benefits? 

Seek professional advice and act in a way that will benefit you and your investing growth.

Wealth Pillar Three: Improve your investing returns

There are three vehicles a person can invest in to improve wealth:

  1. Career
  2. Property
  3. Businesses (Shares)
Ideally you would have investments in all three, but when just starting out this is not so easy. 

What you need to do when starting out or just gaining traction is to take the little you have and multiply it and continue to find ways of investing it that will multiply it faster.

A very basic example of this can be seen as follows:

Stephen (fictional character) has been working hard in his job and paying himself first. He has been budgeting his money in such a way that he is now saving $400 from each fortnightly pay he receives from his work (this equates to $10,400 in savings a year.).

These savings are currently sitting in a bank account earning 3% per
annum, a very low return (note: this low a return in reality likely provides a negative return after taxes and inflation are calculated into the equation.). Stephen has $2,500 saved thus far.

Stephen can begin to find a potential investment that will increase his ROI (Return on Investment) per

A basic example could be moving his savings to a term-deposit that pays 7% per annum. This extra 4% would make a huge difference in compounding returns over the length of Stephen's working life.

An alternative could be for Stephen to invest into his career and to earn a promotion, resulting in increased income.

How much is too much?

Most personal finance books recommend aiming for a 12-15% return on investment for long-term compounding returns. 

The important thing is to do your own research (as I am not qualified to provide information about which products to purchase) and to make decisions that will benefit you over the length of your life, not just in the next one or two years.

Generally if you hear promises of returns higher than you feel comfortable with, chances are they will not be realistic. 

Ensure you undertake due diligence in all your financial decisions before risking losing the capital you have started to build for yourself.

Always remember:

Be on the look out for ways to improve your investing returns. Increase your returns slowly and develop confidence and education so you can more wisely make decisions about increasing your investment returns.

Wealth Pillar Two: Learn to budget

Most people cringe when they hear the word budget. 

This is primarily due to a scarcity thinking and the belief that a budget 'limits' what one can do with their income. 

The first thing you need to do in relation to budgets is to change your mindset. Believe there are benefits, and that a budget can help you to achieve your dreams of wealth.

The next step is to begin using the three main financial statements to track your personal financial details, namely:

  • Profit and Loss (PNL, or Income Statement).
  • The Balance Sheet.
  • The Cash Flow Statement.
These spreadsheets allow you to track where your money is coming from and going to (Note: if you do a search on Google for templates of these, you should be able to find some you can use effectively for your individual purposes).

The third step is to trim the fat. Reduce or eliminate any expenses where possible and begin to save the difference. Examples might include reducing the withdrawals you make of cash from an atm or reducing your car insurance or phone plan. Find out what you can reduce (without limiting your lifestyle) and save the difference.

The final step is to project the financial statements for the future and budget income to meet expenses and savings requirements. Doing this will ensure that you properly allocate money for bigger expenses (such as registration, insurance, etc.) rather than being surprised when it shows up.

This is the basics of budgeting. It is a useful tool which aids in ensuring that you can save 10%+ of your income. Keep using it and adjusting to improve as you proceed along with your wealth building journey.

Wealth Pillar One: Pay yourself first

How does one best prepare and manage during a time of financial crisis? There are several actions and habits which can be implemented, all of which will begin to make lifelong changes to one's financial situation. I will be calling these the 'Pillars of Wealth'. Just like a Pillar holds up a house or another building, these Pillars of Wealth will help hold up your financial household. Now onto the First Pillar of Wealth.

The First Pillar to building wealth is...

Save a portion of all you earn. 

"Boring!" I hear you saying loudly, but you would be amazed at how many people don't actually do it. Usually those who think savings is boring don't have any savings at all.

Savings are important to have both in boom and bust times in the economy. Let's say you start saving $100 a week. While $100 does not sound like a huge amount, at the end of 50 weeks you will have $5,000 in savings. If this savings account has been accumulating interest, their will be a little more (minus inflation and taxes will usually make this extra useless), but let's call assume that you will have $5,000. What is the benefit of having this surplus? There are several, including:

  1. You will have created a safety buffer for income should you end up unemployed for a period.
  2. You can use this amount to reduce debt levels, decreasing your expenses.
  3. You will have increased confidence, allowing you to continue to do your job successfully, leading to a higher chance of promotion.
  4. You will have money to invest when the economic timing is right.
  5. You have shown you can simplify your expenses to less than you earn, which will demonstrate that you have can successfully save and thus undertake the first pillar of wealth creation.

How much should I save?

This is a question that many people ask. Most financial books recommend saving between 10-20% of your income, but the reality is that the more you can save, the more leverage you will be able to create in your financial situation.

Personally, I started my savings with 10% and increase it whenever I can without great personal sacrifice. I would recommend starting with at least 10% of your pre-tax income. If you cannot start with that amount, don't stress! The next wealth pillars will allow you to learn the skills which will provide you with the opportunity to increase the amount you can save. The important thing is to take action in whatever way you can, and begin to build your savings today.

The actions required:

  1. Start saving today. Call you bank and ask them to set up an online savings account and to have a portion of your pre-tax income (preferably 10%+) transferred each week/fortnight to this account.
  2. Commit to your personal success in the current and future economic climates. Getting out of the rut in down times requires life-long habits. Determine to follow these habits from now on!
  3. If you earn any interest, leave it in the account. This will build compound interest (note: you can focus on increasing the amount of interest after you have developed the habit of saving on a regular basis).

Struggle your way through life

Have you ever had a period where life does not seem to be going the way you were told it would in school?

When you first start out in life, you believe that becoming the next successful actor or singer is easy and that you have the ability. So what changes along the way and causes you to begin to struggle?

If you are struggling you are usually stressed. This stress occurs when the goals and dreams you have for your life just aren't coming to fruition that way you had anticipated. Instead, you struggle to maintain an existence similar to the life you had as a child.

How can you quit your struggle and begin to improve your results on the path to your dreams? There are some solutions out there, and they are a challenge to implement:

  1. Be unrealistic
  2. Dream big
  3. Take action
  4. Do it now
  5. Don't look back
  6. Today is the tomorrow you dreamed about yesterday.
If you feel like you are never going to get that desired amount of money in the bank, or that you will never start your business, then stop thinking so much! Take some action and do what seems impossible! Start without a plan, make mistakes and learn along the way.

The main thing is that if you want to be in a different position tomorrow to start making drastic changes today to get there! Don't try saving one hundred dollars a week to one day start a business when you have the money- either start a business using what you have, get a loan or get a new goal.

Procrastination and putting off what you want only results in a list on unsatisfied goals and desires, a broken spirit and settling into a routine of struggling to get what you want out of life.

Don't be that person! Look at what you want to do in your life and make a start now!