Parkinson’s Law In Finance

Sun, Mar 23, 2008

Investment

There is this theory known as “Parkinson’s Law“.

In the context of finance, it means “the more you EARN, the more you will SPEND“.


Many of us were illusioned with this myth, “If this person is a director of a company, this person is a big shot, this person is running his own business…. this person must be filthy RICH!

This person, for sure, have LOTS and lots of money.”

My humble experience as a financial associate tell me otherwise.

The MORE the person earns, the HIGHER his expenses will be.

Come on…. Lets face it!

……………………………………………………………………………………………………………………………………………

” Usually when we are earning $3000/mth, we will have a normal house, a normal car, eat in normal restaurants and go holiday in nearby countries.

However, when our earnings grew, say $5000/mth, without us knowing, we will then get a bigger house, a more sporty car, eat at expensive restaurants and travel futher.”

………………………………………………………………………………………………………………………………………….

This is what we called Parkinson’s Law.

This theory does not only happen to other people.

I am guilty of it too! 🙁

Dont feel syiok good right, earn so much, yet spend so little. 😛

So… What can we do, to counter and avoid being a victim of Parkinson’s Law?

Financial advisors across the board have always emphasize in savings at least 10% of your income.

You must always remember, when your income increases, your savings should also increase too, to avoid Parkinson’s Law.

Maybe when you earned $3000, you save $300 (10%).

However, when your income increases to $5000, your savings should not remained at 10%.

Increase it to 20% ($1000).

With this method, you still can enjoy your increment in your income without feeling guilty ($4000), and you still be able to save more and fight Parkinson’s law ($1000) at its root! 🙂

 

p.s. By the way, if you wish to discover a simple & halal way to create a positive monthly cashflow and calculate your net worth for FREE, then please click here…

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This post was written by:

- who has written 439 posts on The Official Helmi Hakim Website.

A certified financial consultant, Helmi Hakim has won praise for his patience, perseverance and practicality when solving his clients' financial concerns. For more information on how you can manage your finances better, contact Helmi Hakim at 96520134.

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