20/80, the Pareto Principle and FIRE

There is an interesting relationship between FIRE and the Pareto principle. In some sense, the idea behind the 20/80 rule is baked into the very decision to retire early.

You could continue working and accumulating more. Another year of work would mean more savings. Five years would mean considerably more. Ten years would provide even greater financial security. But at some point you make an exchange: the future earnings you could have received are worth less to you than the improvement in your quality of life from no longer having to work.

This is where I think the Pareto principle becomes interesting as a way of thinking about FIRE and life more generally. I’m using 20/80 rather loosely here. I don’t mean that every decision literally produces exactly 80% of the benefit for 20% of the effort. I’m more interested in the underlying idea that gains are often uneven. Getting from nothing to “enough” can be surprisingly cheap, while getting from “enough” to “the best” can become extremely expensive.

The key, then, is making intelligent decisions about what “enough” actually means, and understanding what you are receiving in exchange for stopping there.

What am I actually optimising for?

For me, having most of my days and time free is extremely important. I want to be able to respond to a spontaneous message from a friend asking to meet up, decide to go for a steak lunch, or sit in McDonald’s with a coffee and have an impromptu hour-long chat with AI about some topic that has suddenly caught my interest. I want to be able to decide to spend three months in a foreign country without first needing to negotiate annual leave or work out how I’m going to fit the trip around everything else.

Protecting this free time means accepting restrictions elsewhere. I can’t simultaneously maximise my freedom, spending, possessions, financial security, convenience and every other dimension of life. Something has to give. Over time I’ve developed a general sense of “enough” across many areas of my life. In one sense these limits are restrictive, but in another they are exactly what enables the freedom I value.

That’s an important distinction because I don’t think the objective is simply to be frugal. Spending less isn’t automatically virtuous, and having less isn’t automatically better. The question I find more useful is: What am I giving up, and what am I getting in exchange?

Falling into LeanFIRE

I more or less fell into LeanFIRE in 2022. I’d left my life in London in 2019 and ended up staying in my childhood bedroom during nearly two years of lockdown. I’d already given away my car in 2017 because I didn’t need one in London, my apartment was rented out, and my living costs had become very low. I’d stopped working with the intention of taking a couple of months off before eventually getting back into the grind.

Then, in 2022, I spent three months in Korea. When I looked at the numbers afterwards, I realised that the income from my apartment and the value of my investments had been enough to cover the cost of the trip. I returned to the UK for another three months, where my outgoings were again very low. Looked at across the whole period, the amortised monthly spend was lower still. So I booked another three months away, this time in Tokyo from November 2022 until February 2023. By that point I was becoming pretty confident that the numbers worked.

The idea itself wasn’t completely new to me. Over the years I’d dabbled with not working, including taking a year out to study Chinese on a working holiday visa and trying to start my own software business in 2014. I even remember reading a Steve Pavlina blog post about not working back in 2009 and discussing with a co-worker exactly how much money would be necessary to make such a thing possible. It was an idea I’d repeatedly played with, but by 2022 it was provisional, and by 2023 it was real.

What I get in exchange

Since then I’ve spent many three-month periods in different countries, mostly Japan but also Malaysia, along with shorter stays in Thailand and Taiwan. I particularly like spending several months in one place because it’s long enough to move beyond only doing tourist things. I can develop something resembling a normal daily life, try local restaurants, wander around and discover places I wouldn’t otherwise have any reason to visit.

But three months also isn’t long enough to establish all of the infrastructure of actually living somewhere. I generally don’t have a local bank account or my own permanent home, and I usually stay in hostels. Modern mobile internet has made the lack of a local phone number much less important, but there are still plenty of inconveniences associated with being temporary. Likewise, when I’m back in the UK, I’m usually not there long enough for buying a car or renting another place of my own to make much sense.

Those are genuine sacrifices. Having my own home would be more comfortable than a hostel. Owning a car would sometimes be more convenient than not owning one. Establishing myself properly in every country would remove various little annoyances. But I accept those things willingly because of what I receive in exchange: mobility, novelty and the ability to spend large amounts of time living in different places.

I’m not trying to maximise the quality of my housing or the convenience of my transport. I’m trying to get them to “enough” while protecting something I value more.

Enough stuff

The same thinking affects the things I buy. Many of my shirts and jackets come from second-hand stores, while the rest tend to come from the cheaper aisles of places such as Uniqlo, Primark and Asda. I could buy more expensive clothes and they would probably be better in various ways, but clothing isn’t somewhere I particularly want to maximise.

My laptop is a 13-inch M4 MacBook Air with 256GB of storage and a 1TB external drive more or less permanently attached to the side. My phones are a Xiaomi Poco F6 and an iPhone 13 mini, with the iPhone particularly useful for videos and app development. For gaming I have a ROG Ally Z1 Extreme. None of these represents the absolute cutting edge, but I spent time finding what I considered a good intersection of size, price and performance for the way I actually live.

There are consequences to that choice. I had to give up on playing Final Fantasy VII Rebirth on the Ally, although perhaps compatibility has improved by now, and I’m pretty much assuming GTA VI isn’t going to be an option. I could solve those problems by buying more hardware. But then I’d have spent more money and, perhaps more importantly for my lifestyle, I’d have more stuff to own, store and move around.

Again, the question isn’t whether something better exists. Of course it does. The question is whether the improvement is worth what I would exchange for it.

Even coffee works this way. Before I leave in the morning, I brew a flask using the cheapest filter coffee I can find in the supermarket. No matter how bad it tastes, it’s still better than instant! If I want somewhere to sit while I’m out in the city, I’ll happily go to McDonald’s and buy a ¥150 hot coffee. I could very easily find better coffee. But most of the time what I actually want is somewhere to sit, drink something warm, think, write, talk to AI or watch the world go by. The ¥150 coffee is enough.

Enough exercise

Exercise is perhaps a better example because the trade-off isn’t primarily about money. I have daily tasks to do 20 press-ups, 20 sit-ups, 20 squats and eight minutes of stretching, made up of four two-minute sets of different stretches. Is that going to make me ripped? No.

I’m sure there are considerably more comprehensive workout programmes I could follow, and going regularly to a gym would allow me to do things that aren’t possible with a small bodyweight routine. But that isn’t the only thing I’m optimising for. I also care about whether I can persuade myself to actually do the exercise every day, whether I can do it wherever I happen to be in the world, whether I need equipment, how much time it consumes and how much friction there is between thinking “I should exercise” and actually doing it.

I’ve therefore deliberately chosen to stop somewhere short of optimal. The routine is portable, simple and small enough that I can consistently get myself to do it. I’ve decided that this is enough for what I’m currently asking it to achieve. I could put substantially more time and effort into exercise, but that time and effort would have to come from somewhere else.

This is where I think 20/80 becomes much more interesting than simply trying to find ways to be efficient. The objective isn’t necessarily to find the 20% that produces most of the result so that I can cram even more things into the remaining 80% of my time.

Sometimes the point of efficiency is to simply need to do less.

Deciding where “enough” is

There is no universal point at which something becomes enough. Someone else might find my ¥150 McDonald’s coffee miserable but happily spend very little on travel because having a beautiful home is enormously important to them. Someone might drive an old car while owning an extraordinary gaming PC. Someone else might genuinely love their work and happily continue doing it for another ten years because what they receive from working is worth more to them than retiring earlier.

That’s not a failure to understand the idea. That’s the idea working.

The point isn’t to identify the objectively correct 20%. It’s to consciously decide where “enough” sits for you, and then understand what stopping there allows you to have elsewhere. You can choose where you want the absolute best, where 80% is plenty, where 20% will do, and where you simply don’t care very much at all.

Another way of looking at this is through diminishing returns. The first £500 spent on a computer might transform what you can do. The next £500 might make it noticeably better. Another £1,000 might make it better still, but perhaps only in ways you occasionally notice. The important question isn’t simply whether each improvement is real. It’s what else that money, time or attention could have been used for.

There is always a better computer, nicer home, more comprehensive exercise programme, better coffee, larger investment portfolio or more comfortable way to travel. Almost every part of life can absorb an unlimited amount of money, time and attention if you allow it to. The existence of another improvement doesn’t mean obtaining it is worthwhile.

“Enough” is therefore partly about opportunity cost. Every resource committed to pushing one part of life from good to excellent is a resource that can’t be used somewhere else. Stopping isn’t necessarily accepting less. Sometimes it is what allows you to have more of something else.

The FIRE trade-off

This brings me back to FIRE itself. The biggest application of this principle in my life wasn’t choosing a laptop or deciding how much exercise to do. It was deciding that I had enough money to stop working.

Not the maximum I could possibly accumulate. Not enough to have everything I could conceivably want. Enough that the marginal value of accumulating more became less important to me than the freedom I could receive by stopping.

And the interesting thing about FIRE is that making that decision doesn’t end the process of choosing. In some ways it makes the choices more visible. Once work is no longer deciding how I spend most of my day, I have much greater freedom—and therefore much greater responsibility—to decide how I allocate my time, money and attention.

Financial independence doesn’t mean I can have everything. It means I have considerably more control over the trade-offs.

For me, that has meant accepting deliberate limitations in areas I don’t value highly in order to create abundance in the things I do. Cheap coffee. No car. Hostels. Modest hardware. A simple exercise routine.

And, in exchange, three months in another country with nowhere I need to be tomorrow.

The Pareto principle is often presented as a way to become more productive: find the small number of things producing most of your results, then optimise around them. But I think there’s another way to look at it. The purpose of efficiency doesn’t always have to be doing more. Sometimes it is recognising that you already have enough, stopping there, and keeping the remainder for something you value more.

Perhaps the more useful question isn’t “How much better could I make this?”

It’s “Where is enough for me, and what does stopping there allow me to have elsewhere?”