Parkinson’s Law and Your Money

Parkinson’s law, made famous by Cyril Northcote Parkinson, states that “work expands so as to fill the time available for its completion.”  If something is to be done in a year, it will be done in a year.  If something is to be done in a week then it will be done in a week and so forth.

Think back to when you were in school.  A teacher would give you an assignment that was due in 2 weeks. Did you work on that assignment immediately and get it done? Or did you wait until the day or even night before the complete the assignment?  This is Parkinson’s law in action.

As a teacher, I see Parkinson’s law in action every day.  I assign something that is due in a month and give students plenty of time to work on it.  Yet come the day its due students still don’t have it finished or complain about being up late the night before trying to finish on time.

This law doesn’t only apply to a school setting. Think about deadlines in your workplace or due dates for library books.  At times I thought that I was a procrastinator, Parkinson’s law explains it.

Parkinson’s Law & Financial Deadlines

Think about your contribution to your RRSP or other tax-deferred accounts.  Do you contribute early in the year or wait until just before the deadline to dump in as much money as you can come up with?  

Do you file your taxes as soon as you are able to or do you wait until just before the deadline?  If you are someone who waits until the close to the deadline to do something, you are not alone.  Even though Canadians can file their taxes as early as late February, the majority of Canadians do not file until the end of April.  Closer to the deadline.  

Parkinson’s Law with a Twist

Although Parkinson’s law is often used in productivity circles for learning how to manage your time I think it also applies to managing your money. A reworded Parkinson’s law to reflect this might be “spending expands so as to consume the money available.” 

This explains lifestyle inflation. If you are not conscious of your money, even when you get a raise at work you could still be left with no extra money to save.  Think about it, if you go shopping and have $100 to spend, chances are you will spend $100.  The same can also be said for having and spending thousands of dollars.

There are many mainstream media articles featuring people who make a lot of money yet are still in debt. Their spending habits are expanding to consume the money available.  Without being mindful of it, for some people, more money means more spending, not more saving. 

How many times have you gone into a grocery store (*cough, cough Costco) with the intention of only buying a few things only to have your bill ring up a few hundred dollars?  This is very easy to do if you are using a credit card.  Your spending will expand to consume the money available – in this case, your credit limit is the money available.

How often do you wait until the end of the month to see what money you have left to save, only to realize there is no money left for savings?  All the monthly income has been spent on other things.  There is no money left to save for future goals.

Related Post – FMS – Part 2 – Goal Setting

Gift Giving

For me, besides the grocery store, gift-giving is another place the monetary version of Parkinson’s law shows up for me.  Throughout the year, when I see something I think they someone love, I often buy it.  Then when I total everything together, I have spent way more than I had intended to.  Seeing everything laid out often gives me instant buyer’s remorse because I have overspent.

I think this updated Parkinson’s law also explains why some people go into debt around the holidays.  If credit cards are being used then without being conscious of it, buying gifts for others is the spending that consumes the money available.

Using Parkinson’s Law to Your Advantage

Just like there are productivity hacks you can do to control your time, I’m going to suggest some tips and tricks for using your awareness of Parkinson’s law to control your spending.  There are things you can do today to start taking control of how the money version of Parkinson’s law impacts your wallet and budget.

Parkinson’s Law Tip – Cash-only

One solution is going cash only.  If there is only so much cash available, then that is all that can be spent.  This in part explains the success of the budget envelope system.  This system relies on taking out cash and dividing it up into envelopes for each budget category. 

The advantage of a cash-only system is that no extra debt is incurred. By only being able to spend cash for your monthly expenses, you cannot go into debt.  If there is no cash in the envelope, then there is no purchase.

Related Post – FMS – Part 3 – Creating a Budget

The disadvantage of a cash-only system is that it misses out on the reward potential of credit card points.  I am not saying that everyone should use a credit card.  But if you are someone who pays off your credit card every month then it can be a great tool.

Another disadvantage a cash-only system is that for some purchases this is unrealistic.  Have you ever tried to buy plane tickets with cash?  

Parkinson’s Law Tip – Preloaded Cards

If cash only is not a solution that will work for you, then KOHO may be the answer.  KOHO is a free pre-paid visa card that works anywhere Visa is accepted. Although, KOHO is one option, there are also other options out there for pre-loaded debit and credit cards.

An advantage of a pre-loaded credit card is that they are accepted anywhere credit cards are accepted. So, yes you can use it to buy those airline tickets (as long as they fit into your budget of course).  As they are pre-loaded, meaning that you transfer money from your account to fund the card, you cannot spend more than you have.

For example, if you only want to purchase a few things at the grocery store, then you can just load a small amount onto the card before going to the store.  In this way, when your spending expands so as to consume the money available, you are in control of how much money is available.  

With this method, you cannot spend more than you have which will help prevent you from taking on more debt.  This is another great advantage of KOHO or other preloaded cards.

A disadvantage of pre-loaded or pre-paid credit and debit cards is that they will not help you build your credit score at all. Although I don’t think that your credit score is the be all end all, I do think that it is still important to have some credit to maintain a healthy credit report.

Parkinson’s Law Tip – Out of Sight, Out of Mind

One of the key behaviour tricks we used to pay off our mortgage in under 5 years was to “hide” our money. What I mean by that is we never carried a large balance in our checking account.  That way, whenever we checked our bank balance we never felt like we had a lot of money to spend.

Not seeing a large bank balance tricked our minds into thinking that we did not have money.  Even though we did, just not in that account and not to spend freely.  Our money had a purpose so we moved it into the appropriate account for that purpose.

Related Post – How we Paid Off Our Mortgage in Under 5 Years

As the saver in our family, this trick was key for me.  I would consistently move money from our checking account into our savings accounts, often without my husband knowing.  As he was the spender whenever he did decide to check our account balance (which wasn’t often), there was never a lot of money there.

This made it easy for me to convince him that we had no money to spend.  It wasn’t dishonest, because he knew that I was saving money.  He just never exactly knew how much I was saving until it was time to put those saved dollars to work.  Our savings either went to our mortgage or into our retirement savings account (for the tax benefit).

Pay Yourself First

Another way to take control of your spending is to pay yourself first.  If when you calculate your budget there should be $100 for savings, then transfer that $100 into your savings account as soon as you get paid.  Don’t wait until the end of the month to see if there is money left over.

By paying yourself first you are making less money readily available for you to spend.  If you have never tried this, you will be shocked at how effective this trick can be.

Make It Difficult to Spend Money

Notice how I said, transfer it into your savings account, that’s another key point.  Have separate savings and checking accounts, preferably at different banks.  When you put money into your savings account, make it difficult for you to spend it.

If something is difficult you are less likely to do it, and the reverse is true too.  By keeping all your money in your daily checking account you are making it easy for your brain to want to spend that money.

Parkinson’s Law Tip – Online Shopping

With free shipping, increased product availability and the convenience of not having to leave your home, it’s no wonder online shopping is taking over.  But used effectively, online shopping can save you money and reduce impulse buys – especially at the grocery store.

With online grocery shopping, you can load your online cart with only the things you need.  You are less likely to pick up all those extra impulse purchases that are near the checkout.  There is no waiting in line aimlessly wasting your time.  

Although I think that online grocery shopping is a great way to decrease impulse buys and therefore hack Parkinson’s law, I still go to the grocery store.  I am one of those odd people who enjoys grocery shopping, but I am not immune to impulse purchases.  For this reason, I’m working on applying the other tips listed above.

A disadvantage of online shopping is its’ ease of use.  Here I’m referring to all other online shopping, other than grocery shopping.  Saving your checkout information in your online profile and subscribing to email lists that send you sale details it is extremely easy to spend money.  Again, this is the monetary version of Parkinson’s law in action.

Create Space

To help counteract this, take control of Parkinson’s law.  Create space between the time you want something and the time you purchase it.  Often sleeping on the decision overnight may chance your urge to spend money.

Whenever you are about to make a purchase take a minute to pause.  Ask yourself if this purchase is a need, a want, or something you will regret later.  I’m all for spending money on wants, just not the ones that I instantly regret once I bring them home.

If you are having difficulty remembering to pause, put a post-it on your credit card or in your wallet.  On the post-it write something to remind you to stop and think.  It can be as easy as the word “pause” or “think.”

Delete your saved online profile and unsubscribe from the email list from stores.  Reduce the temptation and make it difficult to spend your money – especially when online shopping.

Recap – Parkinson’s Law Tips

• Cash Only
• Preloaded Cards
• Out of Sight, Out of Mind
  • Pay Yourself First
• Online Shopping
• Create Space

Final Thoughts

Notice how I never mentioned, create a budget and stick to it? Although there can be great value in a budget, sticking to one can also be difficult.  When something is difficult we are less likely to do it. Make it easy to save money and you will save more money.

With a little intention with your money, you can take control of Parkinson’s law.  If spending expands so as to consume the money available, then make less money “available.”  Don’t try to rely on willpower alone to control your spending.  Make it difficult to spend money and you will probably spend less of it.

Hopefully, these tips help you to take control of your spending by hacking the monetary version of Parkinson’s law.