Have you ever wondered why governments keep growing and growing and growing? The closest Washington can get to a cut is to slow the increase in spending – which means if the budget increase is projected to be 10% and it ends up being 5%, that is called a cut! That’s like your boss saying he needs to cut your pay and you graciously tell him that you’ll happily accept a 5% raise instead of the 10% one you normally get. Think he’ll see it as a cut?
Well, Cyril Northcote Parkinson, a British historian and author, wondered the exact same thing. And he discovered a natural law that is as groundbreaking as Newton’s discovery of the Law of Gravity. Parkinson’s Law, when applied to your personal finances, explains why you can never seem to save any money out of your monthly budget to invest and create wealth. Ready for Parkinson’s Law? Here it is:
Parkinson’s Law 1: Work expands to fit the time given for completion.
What does this mean? Well, if you have a month to finish a project, it will take you a month. If you have a week to finish a project, it will take you a week. The actual workload is not the issue – the deadline is the issue.
Parkinson’s Law 2: Expenses always rise to meet available income. Always.
How many of you have thought, “I don’t make enough money to save right now. I’ll start saving when I make more money.” And then you make more money and you still don’t save. It does not matter how much money you make, expenses will always rise to meet available income. Always.
Until you know Parkinson’s law exists and take specific steps to violate it, you will never be able to divert any money to wealth creation on a consistent and systematic basis. The good news is, there are two simple steps you can do TODAY to get on the road to Financial Freedom. Here they are:
- Set specific short term saving DEADLINES. A goal can be adjusted, but a deadline must be met. You can do 3 months, 6 months, no longer than a year. When the deadline is met, set a new one.
- Determine the percentage you want to divert out of your monthly budget and do it FIRST, before any other expenses are paid. If you think you can’t do it, think again. Every single person can find 1-2% out of their budget. Most people can initially find 5-10%. The best part is, once you realize you can do it easily, you can up the percentage.
Now that you know and understand Parkinson’s Law, you can take active steps to violate it. Do it now, do it today. Don’t worry about where to put it – that’s the next step. I started diverting 10% when I had been recently laid off and didn’t know where my next paycheck was coming from. I now divert 20% to my financial freedom bucket, 10% to my education bucket and 10% to my give bucket. If I can do it, so can you and you will be on the road to Financial Freedom!
Chelsea Watkins is Founder/CEO of College Application Training. She has 20+ years of experience in the college application process helping students raise test scores, create winning college applications, fund college expenses, and stay safe in college. Chelsea even goes one step beyond to help with ideas on building wealth for a comfortable retirement.