Wealth is Good
Cash Flow Is Better

This article, written by Keith Whelan, was recently posted on Wise Bread’s personal finance site.

A number of years ago, when I was working for a big company, we had a team of people working on a project with a fairly simple goal: to keep our customers longer.  I knew someone on the team and I remember asking repeatedly – for over 2 years – how things were progressing.  The typical reply was “Oh, this is very complicated.  We’re trying to classify every customer and predict when they are likely to leave us.  Once we do that we will have to find out why they are likely to leave us.  And then….”  That’s when I usually changed the subject.

Needless to say, the project was never completed.  All that time and effort wasted.  I suggested to the colleague, “Why don’t you just ‘80/20’ it?”  That is, first focus the effort on just the relatively small number of customers who generate the vast majority of profits for the company and deal with the remaining, less profitable customers later.   In fact, for most companies 80% of profits do come from only around 20% of its customers.

I like the 80/20 Rule because it can help us manage things more effectively.  Things like our finances.  Focusing on just a few high-impact assets and liabilities, and the cash flow associated with them, can pay handsome dividends.  On the other hand, if you spend all or most of your time trying to micromanage hundreds of smaller daily expenditures…   Read the full article at: http://www.wisebread.com/use-the-8020-rule-to-maximize-your-financial-opportunities

Keith Whelan is Cashflownavigator's founder and author of the "Wealth is Good, Cash Flow is Better" e-booklet. He is a graduate of Columbia University Business School, teaches at Rutgers University, and has over 30 years experience in the banking and financial services industry. Keith, his wife Cindy, and their two sons live in New Jersey.