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Today we’re diving into a fascinating concept called Parkinson’s Law and I want to talk about how it relates to money and make sure you listen right through to the end because I’m going to share some ways that you can become a better manager of your money AND I’ve got a really cool template for you to help you do just that. So without further ado, let’s dive in.
Let’s start with the basics. Some of you might be wondering, what is Parkinson’s Law?
It’s a concept, a principle that originated from a British historian and author named Cyril Northcote Parkinson, as the name implies. The Law states that “work expands to fill the time available for its completion.” So essentially, the amount of time you give yourself to complete a task is the amount of time it will take.
If you have a week to finish a project, it will take you a week. If you have a month, it will take a month and if you have 24 hours, it’ll take you 24 hours. How many of you have waited until the last minute to finish or even begin a project, or to finish editing a gallery.
I can absolutely remember this law playing out for me in high school and in college, especially when it came to writing essays, probably my least favourite thing about school. And this still happens for me with editing, I promise a turnaround time of 5 to 6 weeks so guess how long it takes me to finish – 6 weeks! There has been many a time when I have only just managed to deliver a gallery on time. But I’ll be honest, I do prefer working on other parts of my business over editing.
Now I know you’re probably wondering how on earth does Parkinson’s Law have anything to do with money?
Even though this law is usually applied to time management, it can also be really helpful to think about our money in this way. Simply put, what it means is that our expenses will rise to meet income. I’ll say that again for the people in the back – our expenses will rise to meet the income we have available.
What this means is that if we don’t consciously and intentionally manage our spending, we will always and I mean ALWAYS find ways to spend whatever amount of money we have, regardless of how much it is, because the spending expands to meet the size of the container of income that we have.
For example, think back to when you first started earning money. Whether it was a part-time waitressing job in high school or your first full-time job after college or university, you probably found ways to spend all your earnings no matter how modest. As your income grew over time, so did your spending, often on things that you didn’t previously consider necessary. This is Parkinson’s Law at work!
So many times I read or hear stories about folks who might be earning multiple six figures or more, whether that’s through a full time or part time photography business, a 9-5 or some other kind of business, and that’s great money frankly, yet they somehow manage to still live pay check to pay check and have debt. They’re still running out of money.
This even happened to my very own business mentor years ago when he first started earning multiple six figures in revenue, he somehow spent more than he earned. These days he earns multiple seven figures and he’s learned the lesson and knows how to manage his money. Or, how about all the lottery winners we’ve heard about that spend all their winnings and end up in exactly the same financial spot as they were before they won the money.
If our income increases, our expenses increase too, which can leave us with little or no savings or investments if we’re not intentional about it. There’s a fancy term for this phenomenon called lifestyle creep. We often start buying more expensive versions of things we already own. If we’re not careful this can create a perpetual cycle of living pay check to pay check, no matter how much we earn.
You can earn a million dollars a year and still be broke. What this all comes down to is how we manage our money. Because my friends, how we manage $1 is how we will manage a million dollars.
So my question for you today is how can we attract more income, more profit, more abundance into our lives if we can’t properly manage what we’ve already got? If we don’t have a plan for our money now, if we don’t give every dollar a job now, then we’ll find a way to spend it no matter what we’re earning.
This is a podcast about getting ahead in business and in life so I’m talking about both our business revenue and our personal income which comes from our business revenue. Those two things are in lock step with each other. It’s a dance.
Understanding Parkinson’s Law is the first step to breaking this cycle. Here are four ways that you can leverage this understanding to improve your money management:
The first step is to set clear and specific financial goals
My friends, you’ve got to have a goal! I don’t care what that goal is, it could be paying off your credit card debt, saving for a down payment on a house, paying off the mortgage on your house, buying a second investment property, building an emergency fund, building your retirement fund (we should all be doing those two things anyway), or maybe it’s sending your kids to a private school, or taking that bucket list holiday of a lifetime.
Whatever it may be, having a clear and specific goal gives every dollar a specific job and gives you a dam good reason to focus your attention on the things that you truly want. So that we don’t get distracted by every single shiny new thing that comes along. Because shiny new things come along all the time. So define your goal, define how much you need to save and by when. And make sure you’re specific, the Universe loves specificity – but that’s another episode for another day.
The second step is to know thy numbers
There are numbers in our business that we need to know in order to grow our business such as how many enquiries are coming in, how many of those enquiries are converting, what is our sales conversion rate, and so on. We absolutely need to know those, but I’m not talking about those numbers today.
The numbers I’m talking about here are your financial numbers. We should know exactly what it costs to operate our business. We should know exactly what it costs to carry out each job that we’re booked for, to shoot a wedding for example. We should know our profit margins on everything we sell. And we should also know and understand how we’re spending our personal finances too.
If you aren’t tracking your business and personal finances, then you probably don’t really know where your money is going, you probably don’t realise just how much you might be spending in certain categories, and you’re probably not optimising your money to work for you.
When you have financial clarity, you become conscious and intentional with how you manage money and you can start really working towards that goal that you set in the first step. Clarity is so empowering!
If you want to see how I track my personal numbers, download my Wealth Dashboard template that I use to track and manage my own personal finances and financial goals so that you can start getting that clarity in your own life. This dashboard has been a total game changer for me! It’s so good that I know I could totally be charging for it, and maybe I will one day. But right now it’s yours free, so make sure that you go and get it.
the third step is to automate your savings and investments
Once you know your numbers, a great way to prevent expenses from rising with income is to automate your savings. Set up automatic transfers to your savings and investment accounts as soon as you receive your income. This way, you’ll pay yourself first before you have a chance to spend the money. Your future self will thank you a million times over for doing this.
You can do the same thing with credit cards, automate paying down the debt every time you pay yourself. And as your income and financial situation changes, you can review and adjust the amounts to ensure that increases in income result in increased savings and investments towards your goals rather than increased spending.
The final step is to spend consciously and mindfully
The fourth and final step once you have that financial clarity is to spend consciously and mindfully. I know I know this one can feel super hard especially when we really want something and we have things like credit cards and AfterPay available to help us buy it, but one of the best and most obvious steps to building wealth is to spend less than we earn.
I want to be super clear here, this does not mean living a frugal life; I am not about frugality and deprivation or scarcity. I acknowledge that there may be a time and a place in our lives when we do have to adopt a more frugal mindset but that doesn’t have to be permanent.
As a matter of fact your girl here LOVES experiencing the finer things in life. I love enjoying some luxury here and there, but luxury can be as simple as a massage, it can be a beautiful meal that you eat at an amazing restaurant or one that you make at home. It can mean catching an Uber to wherever you need to get to rather than training it.
Luxury can mean so many different things. So what’s your definition of luxury? And how can you mindfully spend on that? What this point is about is making mindful and intentional choices about your spending, which we can do a whole lot easier once we know our numbers.
Focus on value and quality, not frugality or quantity, or impulsive, mindless spending, and you’ll be on your way to reaching those financial goals and becoming a total badass at managing money.
I hope you found this topic about Parkinson’s Law and how it relates to money insightful and helpful. I hope that it’s given you a fresh perspective and helped you to recognize that when expenses naturally rise to meet your income, you can take proactive steps to manage your money in a way that leads you toward your financial goals, rather than away from them. If you have any questions or want to share your experiences of business or personal finance with me, head over to my Instagram @zeldagreen and let’s continue the conversation.
