The 5/20 Rule: The Boon of Warren Buffet Episode 80, LIFE LESSONS

What is the 5/20 Rule? What differentiates this from the 80/20 principle? Get all your answers from this episode.

Hi friends and welcome to Life Lessons.

As it is well said that learning is a never-ending process, it lies valid in the field of finance too. One must be always learning new tips and tricks to generate finance to be in a safe financial state.  One day as I was going through various concepts regarding the same if found out an interesting principle which when used gives exceptional results no matter whatever may be the situation be. In this episode, I will give a brief description of the same in the best way possible.

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Trivia

Warren Buffet is one of those investors who have been managing to be on the top list of wealthiest people in the world. He has a net worth of over 50 billion dollars. Many people were astonished by his success in the trade market. On further research, an important principle used by him came into the limelight. Like any other being, he too had several goals to accomplish at the same time. To manage these goals, he used a simple yet brilliant tool- the 5/25 rule.

When flint asked Warren Buffet about the solution to get more focused on the goals in life, this rule was the answer given.

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The 5/25 rule

Also known as the 20/5 rule, it is one of those remarkable rules demonstrated by Warren Buffet remarking the emotional intelligence in an event.

There may be many goals in life. But to implement this rule we need to initially select the top 25 goals. This is the first step o implementation of the rule.

 The second step is to brainstorm for a while and decide the top 5 goals among the 25 selected. This generally needs some time and space to think and decide. It is to be noted that this is the most important step among all in the 25/5 rule.

The third step is based on how well we tune our minds according to the selection. Here we need to make our mind in such a way that our focus completely shifts to the five goals selected only. Thus Buffet advised flint in the form of two postulates:

1.       Remain focused on accomplishing the 5 Goals that have been selected.

2.       Stay completely away from working on other 20 goals.

Now the question is- In which scenario does this simple yet intriguing rule prove to be useful?

This rule is mainly useful for those people who are unable to stay focused. These people fail to understand which task or goal needs to be addressed first, and could finish nothing out of this confusion. Implementing this rule at even smaller issues can lead to a probable solution about which task or goal is to be addressed first.

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Difference between the 5/25 rule and the 20/80 Principle

After learning about the 5/25 rule, one of my friends got into an indecision between this rule and the 20/80 rule. I have already illustrated the meaning and use of the 20/80 principle in one of my previous episodes. Check out the episode here.

In Nutshell, the 20/80 principle states that 20% of all tasks give about 80% of all results. This states that identifying that 20% of tasks that give 80% of results can make our flow efficient.

Now, I feel that getting confused between the 5/25 rule and 20/80rule is obvious. It is because both the concepts more or less points to the selection of tasks that give more amount of output. But the area of implementation of both these rules paves out the main difference between them.

As far as the 5/25 rule is considered, we select those tasks that are of more priority to us. But it necessarily doesn’t mean that the selected 5 goals would give 80% of the results of all 25 goals. The selection and decision of the 5 goals is always a personal choice and changes from person to person. On the other hand, if it was a case of the 20/80 principle, we had to select those 5 tasks that would give the 80% of complete results irrespective of their rank in the priority list.

We can thus easily understand that the reason behind implementation actually depicts what rule should we implement in the particular event.

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Bottom Line

We would never know what would turn into the need of the day. The 5/25 rule once turned out to be the best solution for me. This is not just a rule or a principle but also an emotion controller which makes us more focused in life. This unique trait attracted me to make an entire episode on this. It worked out for me, I hope it would work for you too.

Hope you like this Episode.          

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