How the rich defy Parkinson’s law | My Money Sage

When they read Parkinson’s, most of the people think of Parkinson’s disease. However, here I am talking about the Parkinson’s Law. This law states that “work expands to fill the time available for its completion.” This was written in 1955 by Northcote Parkinson, a British naval historian and author. All of us might have experienced the law in our lives at some point or another.

How the rich defy Parkinson's law

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Remember that the time when you woke up early to clean the house, thinking it will take a few hours but it took you all day? That’s Parkinson’s Law. There might have been a time when you thought you will sit the night before the exam and revise for a few minutes and it took several hours. Parkinson’s Law!

Parkinson’s Law manifests in our finances too. Have you wondered how no matter much money you earn, the expenses appear to keep increasing? That’s Parkinson’s Law.

The rich are able to defy this law to make wealth. Here’s how some of them do it. You can try these too.

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Reduce expenses

The Parkinson’s Law is inversely related to your financial freedom. If you want to move your financial life forward, you should create a wedge between your earnings and your expenses. This wedge will be your savings. You need to lock your expenses down to a definite percentage of your salary, save or invest the rest.

The rich can handle their savings and investments to make wealth. If you ensure your expenses increase at a slower rate than your earnings, save or invest the difference, you will become financially independent.

Set money limits

The Parkinson’s Law says that your expenditures rise to meet your income. When you earn more money, your needs become more and you may end up spending more money. So, in order to make wealth, you need to break the Parkinson’s law by setting limits.

Motivational speaker and author Brian Tracy says:

“Here is a rule that will almost guarantee that you become wealthy over the course of your working lifetime: Save and invest 50 percent of any increase you earn in your salary or compensation for the rest of your career. You can spend the other 50 percent of the increase on improving your standard of living. But resolve today to save half of every increase for the rest of your career. This discipline alone will ensure that you achieve financial independence, probably several years before you expect.”

You can set a limit to the amount that you spend every month. Then, you will be able to save the rest of the money. You can even finish all your investments at the start of the month and then spend money. This way, you will be able to invest every month.

Also read: How does expense ratios affect your Mutual Fund returns 

Live below your means

The rich always spend less than they have. They do not need to worry about debt. When you live beyond your means and take loans or swipe your credit card, you will not be able to save money. That’s why you need to spend less than what you earn.

You should start by making a contingency fund for those rainy days. At least 6 months of your salary should be saved in liquid funds or deposits as your contingency fund. Then, draw up a budget and spend less than what you earn.

Anticipate additional income

There are many times that you can get a bonus or a windfall. It could even be a tax refund. You need to plan on how you will spend it. The rich ensure that their surplus money is well invested.

So, you could take that bonus of yours, use a bit for a fancy dinner or purchase a gadget, and then you need to tuck the rest into your savings accounts for your financial goals. The important thing is to plan in advance.

Create a savings routine and automate your savings

The rich always rely on their wealth manager to do things for them. The manager will ensure that the money entrusted to them is saved or invested for good returns. You need to cultivate the savings habit. The best way to develop that habit is to use the magic of electronic banking.

Start saving by automating your Mutual Fund Systematic Investment Plans (SIP). You can set up auto debits for your bank deposits too. You’ll never miss it, and you’ll be able to build up your savings amazingly quickly.

Also read: Save, Plan, Invest & Track Money

Stay a saver at heart

Always think of how you can save money. Do you know that most of the rich love good bargains? They don’t spend lavishly for all that they want. They also try to see if the product is ‘value for money’.

Whenever you purchase a product, compare the price across retailers. This will help you buy the product at discounted prices. You can do this for loans too. When you go for a loan, try to see if any lender is offering the loan at lower interest rate. The lower the interest rate, the more the interest payments that you can save. Even though longer tenure loans can reduce your EMI, your interest payments will be higher. So, opt for lower tenure, lower interest rate loans.

So, keep on looking for great deals, comparison shopping, and tracking down discounts and coupons. Don’t keep changing your household items often, including your phone. Even though you might love to keep buying new stuff, it will only cut down your savings and this might result in you saving lesser money for your goals. So as long as the products in your house are working, don’t buy new ones.

Try these methods followed by the rich and you should be able to defy the Parkinson’s Law. If you want to apply the law right now, here are two things you can do.

Suppose your financial position is going towards bankruptcy. What will you do? You will cut all those frivolous, unnecessary expenses, right? Then, do that right away. Then, you will draw up a budget and spend only for the essentials. You will also ensure that you have enough money to pay those loans or you will see if you can get lower interest rates for your existing loans. Carefully examine every expense as if it was someone else who is using your money. Aim for a minimum 10% reduction in your living costs. If you do all this, you will be able to see how much money you can actually save. Then, you can minimise your expenses and see how much you can invest.

The other thing that you can do is to resolve to invest at least 10% of your income. Even though saving is important, only when you invest, your money will earn more money.

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About the author

KishorKumar Balpalli, believes that financial literacy and discipline is the key to one’s financial freedom. KishorKumar is a Certified Financial Planner, Personal Finance Blogger & the Founder of an award-winning Wealth Management platform. myMoneySage simplifies investing for individuals and amplifies business growth for Registered Investment Advisers by leveraging Artificial intelligence and machine learning. The AI of the machine plus the intellect of the human advisor enables comprehensive & client-centric advice at a fraction of the cost of a conventional adviser. is an award winning personal finance platform. It helps you aggregate all your personal finance accounts like FD, Equity, Mutual Funds, PPF EPF, NPS including, Credit Cards & Loans etc. It's one place where you can track, plan and invest seamlessly. empowers you to invest in zero commission direct plans of mutual funds thereby helping you generate higher on investments. The best part is it comes with a lifetime Free plan.

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