The Pareto Principle
The Pareto Principle (also the 80/20 rule) states that for many events, roughly 80% of the effects come from 20% of the cause. This principle originated from an Italian Economist Vilfredo Pareto, who showed that approximately 80% of the land in Italy was owned by 20% of the population. This principle was also applied to the distribution of wealth among the world population. That is, it is believed that 80% of the world’s wealth is controlled by 20%, while the remaining (left over) 20% of the world’s wealth is shared by 80% of the world’s population.
Robert Kiyosaki, the author of Rich Dad and Poor Dad, however, argued that wealth distribution in the world is actually 90-10. That is; 10% owns the majority of the world’s wealth (90%), while the 10% left-over wealth is managed by 90% (the majority of the world’s population). In other words, 10% of people control/own/earn 90% of the money. In professional Golf, for example, 90% of the money is earned by the top 10%. Same in Football, Basketball, Tennis, etc. This rule is true. The richest men in the world are in the top 10%. They possess 90% of the world’s wealth.
Therefore, having explained this rule, it is important to place more emphasis on what this rule implies. It implies that if you are not wealthy, you are among the 90% of people sharing in the 10% of the world’s wealth. Wealth distribution is not equal; in fact, it is not close to being equal. Interestingly, the rich are getting richer and the poor are getting poorer. Some even argued further that the ratio is getting wider, and moving towards 95/5. Crazy right?! Therefore, it makes no sense to complain about it as it is not going to “change”. What you need, however, is the right information, and the readiness to take action.
So, how do you move from the lower 90% to the upper 10%, who controls the majority of the world’s wealth? What do you need to do?
Join the 10%…
Yes, you read that right! I’ll be discussing practical steps that you can take to achieving this. Of course, you should know that wealth is to be built. There is no “sudden wealth”. Hence, there are certain steps you must take.
Wait, you were not expecting magic steps for wealth building, were you? Any man who wants money must work for money. If you want a share in the 90%, work. I listened to a wise man say “money only comes to value”. You should read that again and again. What value are you putting out there for money to find you? Dangote gives us Cement, salt, sugar and many others. Mark Zuckerberg gives us Facebook, the largest social media platform that connects people worldwide. What are you giving to the world? Complaints about being broke or work aimed at wealth creation?
There is a difference between working to make ends meet and working to make wealth. Work to create wealth. Work to not have to work again. Don’t work to survive. This kind of work is not just hard, but smart! Don’t stay stuck on one source of income. Have multiple sources. Make more money and make more money to get more money.
In his book Rich Dad Poor Dad, Robert Kiyosaki implied that the rich became rich because he invests in what the poor and middle class do not. Investment is putting something for the goal of appreciation. Appreciation here refers to an increase in the value of an asset over time. The intent of investment is to create wealth for the future. Investment is an action taken towards the hope of increasing future revenue. Most people say that investing is risky, so they don’t invest. NO! not investing is the actual risk. More importantly, not knowing “HOW to invest” is a really big risk! Hence, the need to be FINANCIALLY EDUCATED!
Lastly (this should come first actually), become financially literate. The major difference between the poor and the rich is that the rich are financially literate while the poor are financially dumb!
Do you want to become wealthy? Invest in your financial education today. read books, blogs (especially this one). Buy courses on finance, learn how to manage money, how to invest, how to multiply your money, how to plan your financial future, how to build wealth, and many more.
This is actually your first step to creating wealth…. FINANCIAL EDUCATION.
In conclusion, remember that “Rome was not built in a day”. Wealth creation takes time, dedication, the right information and focus. Bt know this, if Warren Buffet, Robert Kiyosaki, Jeff Bezos, Aliko Dangote, Jim Ovia and others can do it, anyone -YOU- CAN DO IT!
ALWAYS REMEMBER THAT! SO, BEGIN YOUR JOURNEY TO FINANCIAL FREEDOM!