“Work expands so as to fill the time available for its completion.” – Parkinson’s Law
If you have heard of Parkinson’s Law, it probably had something to do with time management. I have yet to read a productivity book that fails to mention this law. For good reason, it’s one of the best time management principles around.
Remember when you had to complete a 12-page paper in 24 hours back in college? Somehow you managed to focus yourself on the essential to crank out that last page around 4 AM. This was Parkinson’s Law in full effect.
Even though Parkinson wasn’t referring to money when he first introduced this law, he easily could have stated that, “Expenses expand as to fill the income available.” In other words, every time our income goes up, our expenses also rise.
There are very few laws of money. Parkinson’s Law is one of them. Understanding this principle the difference between reaching financial independence or always being in debt.
7 Tips to Avoid Parkinson’s Law
Following are 7 ways you can avoid falling into the trap of your income rising to your expenses.
- Changing Your Automatic Contributions – Immediately change your contributions towards any automatic transactions once your income rises. For example if you contribute $100 a month into your Roth IRA, up your contributions by your pay increase.
- Track Expenses to Income – Track the ratio of income to expenses, monitor monthly.
- Track Investments to Expenses – Track the ratio of investments to expenses, monitor monthly.
- Track Net Worth - If you continue to see your net worth increasing, you have no problems.
- Use Bonuses All At Once – If your increase comes in the form of a bonus, use your bonus all at one time. For example, if you get a $2,000 bonus at the end of the year, you can immediately invest that bonus into a Roth IRA, pay off debt, or put the bonus towards a goal.
- Use Cash – On days where I know I’m going to spend a lot of money, I try to bring a limited amount of cash. If possible, I leave the credit cards at home. Due to Parkinson’s Law, I always seem to spend my last dollar but never more.
- Change One Thing – If you have been working hard and got a raise, it’s also important to reward yourself. Allow yourself to make a one minor change in how your monthly expenses. For example, allow yourself one nice dinner out or shop at the better grocery store from now on. Be careful though. Most people get in trouble believing that they can make a lot of adjustments as soon as they get a raise.
One Last Thing
Parkinson’s Law is another great reason never to wait to start saving until your income rises. Even if it did, chances are you’re not going to start saving.
Saving just like brushing your teeth. Saving is a habit. A habit anyone on any income can form.