Parkinson’s Law and Money

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Parkinson’s Law

Have you noticed that when someone makes more money, they end up spending more rather than saving the difference? Or have you noticed that if your business day is shorter you can do the same amount of work in 4 hours versus the full 8?

These patterns have been noted in different ways to illustrate Parkinson’s Law which literally says “work expands so as to fill the time available for its completion”, however it applies to other areas as well. When applied well it can boost your productivity while working less hours a day but also can make you aware of potential danger zones, such as when you make more money you may spend more. Awareness is the first step to help you to avoid such pitfalls (think of those who earn millions in professional basketball and end up losing all or most of it in a matter of years).

Google a number of articles on this using keywords “Parkinson’s law” and “money” to start reversing the negative aspects of the trend and using the positive to your advantage. (One article is here)

Check out a fun illustrative clip below. Article continues after short clip.

Money Personalities

Investopedia explains there are different money personalities. It helps to identify your own to know what you are dealing with and then proceed with possible adjustments to invest more money into your future.

Big Spenders

Think about a basketball player or football player making millions per year. He always talks about the next big thing to buy, the next party, always trying to stay “on top” and living the enviable life. Sometimes big spenders may lose control and lose millions in what we consider a short period of time. Google “basketball [football, celebrity] player and bankruptcy” and you’ll see some examples.

From Investepedia: “Big spenders love nice cars, new gadgets, and brand-name clothing. People with a “spending” personality type aren’t typically bargain shoppers; they are fashionable and always looking to make a statement. This often means a desire to have the latest and greatest mobile phone, the biggest 4K television, and a beautiful home.

When it comes to keeping up with the Joneses, big spenders are the Joneses. They are comfortable spending money, don’t fear debt, and often take big risks when investing.”

Savers

From Investepedia: “Savers are the exact opposite of big spenders. They turn off the lights when leaving the room, close the refrigerator door quickly to keep in the cold, shop only when necessary, and rarely make purchases with credit cards. They generally have no debts and may be viewed as cheapskates. ” They are not the fun one at the party and generally not someone looks up to as far as living out concepts such as “you only live once”, “carpe diem”, and are never the poster guy for theme parks. Boring as sin.

From Investepedia: “Savers are not concerned about following the latest trends, and they derive more satisfaction from reading the interest on a bank statement than from acquiring something new. Savers are conservative by nature and don’t take big risks with their investments.”

While they may definitely NOT have the most exciting Instagram page, big spenders and shoppers would do well learning something from them without losing all the fun in their life. There can be a balance of being happy with your money without falling victim to Parkinson’s Law in the fullest negative sense so you can save for your future. Extreme savers would also do well living a little.

Shoppers

From Investepedia: “Shoppers often develop great emotional satisfaction from spending money. They can’t resist spending, even if it’s to buy items they don’t need. They are usually aware of their addiction and are even concerned about the debt that it creates. They look for bargains and are happy when they find them.

Shoppers are varied in terms of investing. Some invest regularly through 401(k) plans and may even invest a portion of any sudden windfalls, while others see investing as something they will get to eventually.”

Debtors

From Investepedia: “Debtors aren’t trying to make a statement with their expenditures, and they don’t shop to entertain or cheer themselves up. They simply don’t spend much time thinking about their money and therefore don’t keep tabs on what they spend and where they spend it.

Debtors generally spend more than they earn and are deeply in debt while not putting much thought into investing. Similarly, they often miss taking advantage of the company match in their 401(k) plans.”

Investors

From Investepedia: “Investors are consciously aware of money. They understand their financial situations and try to put their money to work.

Regardless of their current financial standing, investors tend to seek a day when passive investments will provide sufficient income to cover all of their bills. Their actions are driven by careful decision-making, and their investments reflect the need to take a certain amount of risk in pursuit of their goals.”

Investopedia may say Investors are doing the best out of the 5 personalities but consider the source. Even Investors can be like Savers in that their friends and family may not think well of them because they are a cheapskate. Again, I would recommend balance here, spend a little on those you love, something meaningful to them, not you, and maybe spruce up your wardrobe to look and feel your best. Not everything is saving and investing, there is a beautiful world out there to explore and experience!

Looking for more tailored advice to your situation? Why do you think the way you do and how to reverse trends that may be addictive, fun or scary? Contact me today and we’ll discuss where you are and where you want to go with your money so you can feel more empowered.