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Why People Succeed or Fail

Parkinson's Law is one of the best known and the most important laws of money and wealth accumulation. It was developed by English writer C. Northcote Parkinson many years ago and it explains why most people retire poor.



The Way the Law Works

This law says that, no matter how much money people earn, they tend to spend the entire amount and a little bit more besides. Their expenses rise in lockstep with their earnings. Many people are earning today several times what they were earning at their first jobs. But somehow, they seem to need every single penny to maintain their current lifestyles. No matter how much they make, there never seems to be enough.

Wow when I saw the title to this post I thought it was the disease Parkinsons!

I think that spending and saving habits are shaped early in life, and that Parkinsons Law may apply more to some family's than others. For example. My grandparents grew up poor, had $50 when they married, and learned to penny pinch. Through hard work and entrepreneurship they became millionaires, and they do treat themselves to nice things in moderation. However in many ways they still live like poor people. My grandma still clips coupons and buys inexpensive clothing.

I think that our culture has evolved a lot since the post-war and great depression eras and now everyone feels entitled to cable, ipods, Nitendo Wii, designer clothes, etc. Thats become the social norm and people live beyond their means, go into credit card debit,to buy these things they think are necessary.  I think this cultural shift has led to Parkinsons!

For what its worth, I think the only way to help kids is to cut them off and let them become independent, even if they blow it financially.  My parents helped me design my first budget and taught me the tips and tricks they use which helped, but I admit I am not as smart about it as they are.  I think they should teach personal finance in schools.