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Saturday, 13 November 2010

Parkinson's Law of Finance

By Albert Yang

Parkinson's Law of Finance, “Expense expands as to fill available budget” is probably the singularly biggest reason that you will retire poor. Its defeat will also be the singular reason you will retire rich. A lot of people, who are making $2000 a month, will say “If I only made more money, things will be better.” What happens though, is when they make $4000 a month, or even $10,000 a month, they feel the same pressure, if not MORE pressure because as their salaries increased, so did their expenses. While not in so many words, the book

“The Richest Man in Babylon” by George S. Clason, teaches a method to defeat Parkinson's Law of Finance. By saving a fixed pE J'@ ECwU PJ\P d in their lives. It is so important that it bears repeating one more time and in all caps:

PARKINSON'S LAW OF FINANCE, AND ITS DEFEAT WILL BE THE SOLE DETERMINANT OF WHETHER YOU ARE RICH LATER ON IN LIFE OR NOT.”

Consider etching that into stone and hanging it on your wall. With the modern methods of automation we have at our disposal, we really have NO excuse why we can't defeat Parkinson's Law of Finance. Going to Harvard, or getting a good job, these play at best- in their lives. It is so important that it bears repeating one more time and in all caps:

PARKINSON'S LAW OF FINANCE, AND ITS DEFEAT WILL BE THE SOLE DETERMINANT OF WHETHER YOU ARE RICH LATER ON IN LIFE OR NOT.”

Consider etching that into stone and hanging it on your wall. With the modern methods of automation we have at our disposal, we really have NO excuse why we can't defeat Parkinson's Law of Finance. Going to Harvard, or getting a good job, these play at best, 3rd fiddle to Parkinson's Law of Finance as far as your wealth and poverty is determined. I've summed it up in one paragraph, but please don't let the volume of words fool you. I cannot stress it enough, if you have no solid financial plan in which to defeat Parkinson's Law, then no matter how much money you make, it will eventually become zero.


The fool and his money are soon parted.” (Thomas Tusser) and how true it is! I believe Mr. Tusser was talking about the lack of understanding of Parkinson's Law. If you are still not convinced, look at movie stars of Hollywood and those who have gone bankrupt. They make, (have made) millions and still manage to blow it all away? Why?!? The answer, Parkinson's Law. If you get nothing else from this book, this point alone is well worth the price of the book.

So we've discussed Parkinson's Law and how it pertains to time, and money, but what about a husband or a wife? What about what kind of car you drive, or eating good food vs. fast food? How can all this be blamed on Parkinson's Law??

Simple, in its most generalized form, Parkinson's Law states that “You will always get, the lowest item of which you deem acceptable.” This means that if you think, “ugly” is ok, then your husband or wife will be ugly. If you think “I don't really care what we eat, McDonalds is ok” then you will eat McDonalds.

If you say “I don't mind if a job pays only $5 an hour” then you will get a job that only pays $5 an hour. Whatever item you deem acceptable, the lowest item on that list is what you will get. If you go to some place that is dirty, the reason that place is dirty is because the people that live there, deem that level of dirtiness to be acceptable, and therefore, generalized Parkinson's Law kicks in and that place is dirty.

If you “don't mind” that your future husband smokes, then your future husband will smoke. If you don't mind that your future wife is fat, then your future wife will be fat. If you don't mind that you eat microwave dinners for dinner every night, then you will eat microwave dinners every night. While this sounds almost ridiculous, it is not.

When you hear interviews or read books about very successful people, you will notice that amongst them, the commonality that they all will not accept substandard to be passed as par standard. Subsequently, they never receive substandard anything. Think of it like this, there is a hurdle, and you will always just cross over that hurdle. If that hurdle is low, then what you get is low, if that hurdle is high, then what you get is high. Do you want your house to be clean all the time?

Apply Parkinson's Law to it, and deem dirtiness unacceptable. You will be surprised how something as simple as raising the minimum accepted standard, will have a profound impact. I remember in high school, there was an English teacher I had who had a ridiculously high standard. Consequently, everybody stepped up their game, and met her standards.

If it's ok to leave the dishes undone overnight, then they will be left undone overnight. If it's ok that your kids bring home bad grades, then they will bring home bad grades. Parkinson's Law, as you can now see, controls almost everything around you. But it gets worse. Parkinson's Law is against every fiber of human nature.

For most of us, given a choice of difficult or easy, we will always default to the easy. That is human nature; and when you do so, you have lost the battle against Parkinson's Law. Like manna from Heaven, defeat of Parkinson's Law, cannot be stored like canned goods; its defeat cannot be accumulated like frequent flyer miles, and its defeat cannot be given to someone else like a well wrapped gift box. You and you alone can see your Parkinson's Law at work in your life, and only active daily effort can keep it at bay. It's harsh news, but it is reality, you can NEVER get rid of Parkinson's Law, but on a daily basis, with careful planning and help from other laws, you can at least keep it at bay. When you do though, your life will open up to a wonderful world filled with excitement and possibilities.

It is CRITICAL, that you understand this law, and its profound effects on your life. It is equally critical that you can SPOT this law before it happens, and prevent it from happening. Later on in the book, as I cover more laws, I will help you use a combination of things to defeat this law and in fact, use it to your advantage.

Continue to read next? Yang's Law in Investing

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