The Art of the Vital Few: Key Decisions that Can Build Your Financial Future

By Andy Baxley, CFP®, CIMA®

When we break effective long-term financial planning down to its essential components, what we find are a series of key decisions about how we manage our resources. We don’t have to get all these decisions right in order to achieve our goals, but it’s important to watch out for a select few that have an outsized impact.

The Pareto Principle, also known as “the 80/20” rule and “the rule of the vital few”, states that 80% of outcomes can be traced back to 20% of causes. In other words, success is not a result of getting every decision exactly right, but of learning to recognize the “vital few”, the 20% of decisions that will come to determine 80% of the outcome.

Nowhere is this more true than financial planning. It is perfectly natural to perceive every financial decision as being of the utmost importance, but the reality is that certain choices have far greater impact on our long-term results than others.

Interestingly, this holds true at every stage of life. While the “vital few” decisions a young couple faces are certainly different than those of the mid-career professional or the recent retiree, each of these people share one thing in common- the importance of learning to identify and focus on that which is most impactful.

As a financial planner, one of my most important responsibilities is to help my clients recognize what they can do today to begin building the future of their dreams. I encourage clients to focus first on the decisions and actions that will have the greatest impact in getting them to their desired future state. It is the art of the vital few.

This process looks a little different for everyone, as no two people or situations are quite the same, but patterns do tend to emerge. Here are some of the vital few decisions, broken down by life stage, that seem to be somewhat universal.

Young Adulthood (20s)

  • Making the decision to save and invest
    • Did you know that over 96% of Warren Buffet’s wealth was accumulated after his 65th birthday? Buffet has been a profoundly successful investor but his real secret weapon is time. He started investing at 10 and has now enjoyed eight (!) decades of growth. Making the decision to begin investing early harnesses the power of compound interest for your benefit. Einstein called compound interest the 8th wonder of the world. It’s a great ally to have on your side.
  • Learning the basics of financial literacy
    • Financial success may not be easy, but the essential principles are actually fairly simple. Some have argued that they can even fit on a single index card. Choosing to spend a few hours to learn the basics of personal finance in our twenties has the potential to lead to a lifetime of prudent decision making.
  • Choosing your career wisely
    • Many of us will spend about a third of our adult lives at work- roughly 90,000 hours. It is therefore essential to make sure we choose a career that (a) pays the bills (ideally with room to spare), (b) offers opportunities for personal and professional growth, and (c) is in a field you find interesting. Note: it doesn’t have to be perfect, and it’s probably not going to be when you’re just starting out. Invest your time and energy in something you find meaningful and you’ll be on the path to make the most out of those 90,000 hours.

Mid-life (~30-50)

  • Learning to recognize “enough”
    • As Morgan Housel put it in his fantastic new book, The Psychology of Money, “the hardest financial skill is getting the goalpost to stop moving”. It can be tempting in our thirties and forties to cash in our higher paychecks for an increasingly lavish and flashy lifestyle. True wealth, however, often goes unseen. It’s saved, invested, and compounded. It belongs to those who choose to align their goals with their own personal definition of “enough”.
  • Deciding what is truly important
    • People in mid-life often report the feeling that their attention and time are stretched woefully thin. Mid-life crises afflict those who struggle to be intentional about deciding what is truly important, only to look back years later and realize they’ve mismanaged their most precious resource- time. Investing in the people and activities we love most is worth it, every time.
  • Protecting who/what is most important
    • Yes, this is a plug for doing a careful review of your insurance portfolio. Things can change in an instant. It’s essential to protect your family against worst-case scenarios.

Pre-retirement (~50-60)

  • Choosing a knowledgeable, ethical advisor
    • I advocate for the value of sound financial advice at any age, but the pre-retirement years are especially critical. The value of your investment portfolio is likely to be near its apex at this age, so the stakes are extremely high. This also happens to be when you will make some of the most important decisions about how, where, and with whom you’ll spend your precious retirement years. Having a great financial planner who takes the time to get to know you and always acts in your best interests is essential to making sure you’re ready to live the retirement of your dreams.
  • Building a portfolio you will stick with
    • The best exercise routine, as the saying goes, is the one you’ll stick with. The same rule applies for investment portfolios. Choppy markets can be very unsettling, especially for people who are relying on their life savings to fund a multiple decade retirement. Getting scared and selling at the wrong time, while completely understandable, can be devastating to the viability of your financial plan. Choosing a portfolio that properly balances risk/return is mission critical for pre-retirees.
  • “Practicing” retirement
    • I would argue that the most important risk retirees face isn’t to their portfolios, but to their self-identity. For many of us, our life’s work comes to define much of who we are. Retiring, therefore, can feel like losing an essential part of ourselves. We can mitigate this by choosing to “practice” retirement while we’re still working. Make a list of meaningful activities you might like to pursue in retirement, then start pursuing them! That way, you’ll be ready to live your best life when the day finally comes.

Golden Years (60+)

  • Collecting Social Security
    • Over a third of Americans begin collecting Social Security as early as possible (currently age 62), permanently locking in a reduced monthly benefit in the process. While there are valid reasons for collecting early, the truth is that many people who do this end up reducing the total amount collected from Social Security by tens or even hundreds of thousands of dollars. Determining the appropriate age to begin collecting Social Security is quite simply one of the most impactful decisions retirees will make.
  • Developing a sustainable drawdown strategy
    • Nobel Prize winning economist William Sharpe called retirement income planning “the hardest and nastiest problem in finance”. Draw too much from your portfolio and you risk running out of money in your later years. Draw too little and you risk living far more conservatively than you needed to, potentially missing out on some of the richest experience’s retirement has to offer. Fortunately, a good financial planner can work with you to determine your personal sweet spot.
  • Having a thoughtful approach to your legacy
    • Many people think legacy planning is simply an exercise in tax mitigation. This couldn’t be farther from the truth. True legacy planning is the process of ensuring that your life’s wealth—which includes financial assets but also cherished belongings, intellectual capital, and decades of accumulated wisdom—is passed to younger generations in a way that thoughtfully honors your intentions and deepest wishes. Choosing to engage in this process has the potential to change the lives of your loved one’s decades after you’re gone.

This collection of key decisions is by no means exhaustive but the hope is that it will inspire you think about your own “vital few”. If you’d like help on your quest for lasting financial security – give me a call, I’d love to help!


Andy Baxley cfpAndy Baxley, CFP®, CIMA®, is a Financial Planner in the Chicago office of The Planning Center, a fee-only financial planning and wealth management firm. Email him at