What is The Rule of 95/5 in Spending?

I’ve just finished reading the marvelous book Unreasonable Hospitality, by restauranteur and hospitality enthusiast, Will Guidara. The book is part foodie memoir, part management/business manual, and fully inspiring to creativity & connection. 

Will Guidara's Rule of 95/5

One of the concepts that he discusses is “The Rule of 95/5”: Manage 95 percent of your business down to the penny; spend the last 5 percent “foolishly”.

“It sounds irresponsible; in fact, it’s anything but. Because that last 5 percent has an outsize impact on the guest experience, it’s some of the smartest money you’ll ever spend.”

One example Guidara gave was spoons for the gelato cart that he had managed at the Museum of Modern Art (MoMA). Unique, well designed, amazing, and… “preposterously, heartbreakingly expensive.” His boss had been wary, but he aggressively managed the rest of the budget, so his profit & loss statement was still great; and, the impact on visitors was one-of-a-kind.

Another example: at the fine dining restaurant he ran (Eleven Madison Park), there was a budget for wine pairings. Typically, how it is done is that the budget is split evenly across the multiple courses for wines. What they did was select slightly less expensive wines for the majority of the courses, and sprang for one special, rare, and more expensive glass. For wine enthusiasts, the surprise & delight of the unexpected splurge made the experience unforgettable.

The 95/5 Rule for Personal Spending

I love this concept!

So much of our own personal life of "budgeting" has been, essentially: spend as little as possible (you can guess how I would reset my lifestyle creep). But, the unsustainable (or maybe psychologically unhealthy) side effect of that method is that there is never room for guilt-free, "foolish" spending. 

Allowing "permission" for a small portion of the budget to be allotted for "fun money", "mad money", or simply dedicated, intentional spending (to facilitate an impactful outcome) is a revelation. 

This is not about lifestyle creep: you don't want to earmark 5% and then have that amount dissolve away into coffees or extra-soft TP splurges. The key is intention. 

Will Guidara wanted the gelato experience in the Sculpture Garden to match the marvel and beauty of the artwork of the space (Picasso, Matisse, etc.). So he sought ways to elevate the simplicity of a cool snack into something memorable & hospitable.

What could the 95/5 rule look like, personally? 

If you have a set budget, look at what areas might be able to tighten up, to be a bit more aggressive in limiting, to free up a bit for bigger, intentional impact.

Examples of the 95/5 Rule 

• Cut expenses by: flying at more inconvenient times; passing up upgrades; managing meals with groceries; cut a night's accommodation by staying with a friend, sleeping in a tent, using points, or leaving early/late to maximize vacation days (but fewer nights); dinner at a famous or pay-for-the-view restaurant
• Splurge by: choosing an experience that otherwise would have been too pricey; each having mad money for "foolish" vacation mementos or treats; renting a luxury car instead of the standard; etc. 
  
  

With food:

• Cut expenses by: adding a veg/pulse-based meal per week; finding store-brand alternatives; using coupons; limiting fast casual / fast food 
• Splurge by: Making a specialty protein & meal once/month (e.g. rack of lamb); Buying organic or local etc. for one category that you want to care more about; Purchasing niche foodie ingredients; Dining out, or dining out at a dream restaurant, or letting everyone order a drink if they normally would get water; etc.

In regular life:

Obviously, everyone's decisions vary based on your own priorities, values, interests, etc. But, what would it look like if 5% of your revenue was set aside for intentional impact? To be considerately spent on whatever is important to you?

Honestly, this is what our kantha quilt blankets have meant to many of our customers! A kantha throw has been the splurge that brings a wow factor to a living room, to a life.

Maybe a kantha throw has been the one-of-a-kind, unique accessory to style an ikea room, or the extravagance to warm a dorm room amidst big box staples. What a fun honor!

What do you think?