11 The 20-80 Rule and the way to joy on a budget

I first heard of the 20-80 rule from Robert Callaham, retired Chief of Research of the US Forest Service, in 1993, in a management development program he gave along with Colonel Pathak from Innovative Consultants Combine, Pune. The second context in which this principle was quoted and illustrated in great detail, was on Robert Monaghan’s site on medium format photography "medfmt.8k.com”, where he demonstrates how just 20% of your equipment satisfies 80% of your needs. Photo enthusiasts being often “equipment junkies”, they continue buying stuff long after they have covered their normal requirements, making it a needlessly costly hobby. We have even coined terms to describe this affliction, such as “Nikon Acquisition Syndrome (NAS)” or its sibling, “Canon Acquisition Syndrome (CAS)”, brought on by endlessly poring over glossy brochures and analyzing different models. No doubt this is the case with other hobbies and professions too, since men do like their tools and toys in all cultures!

I wonder whether you have noticed how house procurement invariably leaves you in a situation of bankruptcy. Very recently, there was an item in the newspapers that the child actress of an internationally acclaimed film shifted from her little place in a slum to a one-and-a-half room flat that cost… hold your breath… 40 crores or 400 million rupees (used to be roughly 50 rupees to a dollar); it just so happens that this is all they could scrape together from all her film earnings and the donations into a trust for her (I live in a house which cost me and my wife some 15 lakhs to build… it has five, admittedly small, bedrooms). The most important thing in her life now is that she is going to a mainstream school and learning English.

But she (or her family) is not alone in sinking everything into one major investment; every one of us puts their entire life’s savings into a house, plus a hefty sum over and above that, leaving them broke and indebted for life. If you have 25 lakhs (a lakh is a hundred thousand), you will beg or steal another 5 lakhs to build or buy a house beyond your capacity; if you have 10 lakhs, you will contract to spend 15 lakhs. Prince or commoner, we are all broke and in debt, because as you build your house on a budget of 20 lakhs, there will be enough temptations to push you into the 25 lakh bracket. Or higher… “you only build once”! The fact, however, is that much of the additional expenses are to please someone else’s idea of who you should be. At the end of it, not only are you broke and anxious, you also cannot enjoy it… either you have no spare cash, or you have to rent it out to meet the payments, or you’re ready for a nursing home, or it’s just too big for you as the children leave. You say that it is an investment; but not only can you not easily convert bits of it into cash as you need (and where will you live if you’ve sold it), but actually the physical structure is more or less a liability that detracts from the value of the land it stands on; any appreciation is going to be in the land value, not the building.

The building contractor will always tell you to make your budget, and be prepared to add at least 20% to it. You would have been better off spending 20% less than the budget by cutting out frills, reducing your debt, and spending the cash on a world cruise.  Also, the budget grows to pull out all the money you have, which is why the first question you will be asked is “how much do you have to spend”, rather than how many rooms or bathrooms you want; which is why you should always quote a figure considerably lower than what you have in mind (he’ll get there, never fear!). Once again, 80% of your needs are probably being satisfied by just 20% of the expenditure… the rest is icing (in house building, that’s called doing up the “elevation”).

Very recently, I realized that whole books have been written about this specific subject*. The burden of the story is that most of our stuff can be dealt with by a small fraction of the resources we can commandeer, so we should go through life with a sense of abundance, not one of poverty. What does it matter that you don’t have the wealth that the As and the Bs command, if the end of it is the ugliest mansion in the whole world, be it ever so tall or however close to the edge of the ocean? Your cottage is more comfortable and prettier by far, and leaves you enough resources to enjoy it and pay the bills!