parkinson’s law money

Parkinson’s Law, II




law (2) actuarial frustration
habit savings dependent
trap affluent flat broke
earn lockstep condition (2)
end up splurge allowance
debt pleasure willpower
worry yummy predicament
key (2) put aside associate (2)
pastry corollary better off
extra at least formative years
salary expenses material (2)
desire charity possession
violate achieve deliberately
allow lifetime fulfillment
rate income keep up with
invest resolve satisfaction
violate manner consciously
urge situation accumulate
resist sufficient embarrassed
escape nest egg consistently
shame somehow look down on
compel consume



According to actuarial statistics, of a hundred working people who retire at the age of sixty-five, only four will be financially independent. Fifteen will have some savings put aside — while eighty-one will be flat broke, dependent on pensions and charity.

Only about two percent will do really well, financially.

Now how can this be?

Why do most people retire poor, despite living in one of the most affluent times and societies in all of human history?

Parkinson’s Law

It’s because they fall into a trap — as explained by Parkinson’s Law.

The Law says that as people make more money, their spending habits also increase. No matter how much people’s incomes increase, they tend to spend the entire amount, and a little bit more besides.

Their expenses rise in lockstep with their earnings. Many people are earning today several times what they were earning at their first jobs.

However … somehow … they splurge it.

So financially they end up no better off. Overspending is a primary cause of debt, money worries and financial frustration.

But Why?

But why do people put themselves in such predicaments?

It’s because as children, when we get our first allowance, we go to the shop, and buy and eat candy!

We become conditioned to get money from our parents, then spend it on chocolate, ice-cream and pastries because they taste yummy and make us feel good (at least for a short while).

So in our formative years, we come to associate money with pleasure.

When we become adults, whenever we get extra money, our first thought is spending it on things that make us happy. People connect satisfaction and fulfillment with material possessions: fancy cars, suburban homes, fine dining, exotic vacations, furniture and decorations, fashionable clothes.

And if we don’t have nice homes and cars, others will look down on us. We feel ashamed and embarrassed. We feel compelled to “keep up with the Jones”.

However what this does is keep you broke . . . all your life.

The Solution

So how do you escape this situation?

It’s really quite simple.

The first corollary of Parkinson’s Law says: “To achieve financial independence you must consciously, deliberately and regularly violate Parkinson’s Law.”

The second corollary of Parkinson’s Law is: “If you allow your expenses to increase at a lower rate than your earnings, and you save or invest the difference, you will become financially independent in your working lifetime.”

This is the key.

Your expenses may rise as your income rises, but you must never allow your expenses to rise so high that they consume everything that you are earning.

Violating Parkinson’s Law

Here is how to break Parkinson’s Law: Whenever your income increases, resolve to save half of that increase. If you get a salary increase of $200, save and, or invest at least $100. This still leaves you the other $100 to do with as you desire.

Do this for the rest of your working life. In this manner you can continue to improve your lifestyle as well as accumulate more money.

It is only when you develop sufficient willpower to resist the powerful urge to spend everything you make that you begin to build your nest egg and move ahead of the crowd.

By consistently violating Parkinson’s Law, you will eventually achieve financial independence.

*     *     *     *     *     *     *


1. Most people will enjoy their retirement will have a large nest egg. True or false?

2. What is Parkinson’s Law regarding income? Describe Parkinson’s Law in terms of income.

3. According to the text, our spending habits develop after we get married. Is this right or wrong?

4. Is there a social pressure to spend lots of money?

5. What is the solution? How do you break Parkinson’s Law?

6. Only professionals, business people and other high earners can achieve financial independence. Yes or no?

A. What do children spend their money on? What did you spend your money on when you were a child?

B. What do young adults spend their money on?

C. How do married couples and middle-aged people spend money?

D. Do people feel compelled to have a nice home and car? If people don’t have a nice home and car, is it considered a shame?

E. What percent of people retire with no savings? What percent of people are dependent on pensions or social security? What percent are financially independent?

F. What will happen in the future?

Comments are closed.