The 85% Solution
Solve 85% of the problem
The 85% Solution is about solving 85% of a problem, rather than trying to find a perfect solution. This approach can be applied to personal finance by focusing on making progress rather than achieving perfection. By automating finances, investing in a few key areas, and avoiding unnecessary complexity, individuals can make significant progress towards their financial goals.
- Simplification is key to making progress in personal finance.
- Automating finances can help individuals make consistent progress.
- Investing in a few key areas can be more effective than trying to optimize every aspect of one's finances.
- Identify the 85% SolutionDetermine the most important aspects of personal finance to focus on, such as automating savings and investments.Pro tipStart by identifying the areas where you can make the most significant impact.WarningAvoid getting bogged down in minor details.
- Automate FinancesSet up automatic transfers for savings, investments, and bill payments.Pro tipUse technology to streamline financial tasks.WarningBe careful not to over-automate, as this can lead to a lack of control.
- Invest in Key AreasFocus on investing in a few key areas, such as retirement accounts and low-cost index funds.Pro tipDiversify investments to minimize risk.WarningAvoid putting all eggs in one basket.
Smart Sally starts investing $200/month at age 35 and stops at age 45, resulting in a significant amount of money.
Ramit Sethi developed this concept as a response to the tendency for people to get bogged down in minutiae when it comes to personal finance. He observed that many people spend too much time debating minor points and not enough time taking action.