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Parkinson’s Law and the Impact on the Creation of Wealth

30 September 2020
Mark Friend
Payroll, People, Building a Business

Have you ever felt frustrated because despite earning more money your savings never seem to increase? If so then you are not alone as the vast majority of people in the UK experience this same phenomenon. In fact it was first articulated in 1955 by Cyril Northcote Parkinson in an essay in the Economist to describe time. He wrote “It is a commonplace observation that work expands so as to fill the time available for its completion”. You probably find when you have only a short period of time to perform a task miraculously you get it done! Efficiency reaches new heights when you’re under pressure, whilst conversely if you allow yourself more time you simply fill it with the task in hand. The product produced is no better despite the extra time taken!

The theory has been used many times in other areas too. Your computer is a great example. It doesn’t seem to matter how much data capacity you have you will fill it! This brings us back to money. For some reason the more you earn the more you spend!

When you think back to when you first left your parent’s home it was hard, but somehow despite a low salary the mortgage or rent was paid for, you had great clothes and that cool fun run-around car. As years passed by your income has gone up and for some reason spending goes up, more expensive clothes, a new car, the latest gadgets and so on. The trappings or at least the image of success!

It is amazing that 1 in 3 people in the UK will have no pension when they retire and will have to rely on a state pension, and that 50% of the adult population have a net wealth of less than £100K. Remarkably approximately 20% of the wealth in the UK is in the hands of just 1% of the population!

Deep down we all know the secret of the creation of wealth but consumerism is a hard beast to overcome and for many it is undesirable. But there is a choice. The reality is that most of us are capable of achieving great wealth.

Wealth creation has been written about in numerous books.  Back in 1926 George S Clason wrote the classic book “The Richest Man in Babylon” which provided personal financial advice through a collection of parables set 4,000 years ago in ancient Babylon.  It is considered by many as a classic and dispenses simple straight forward advice that works and  has been adapted today in numerous books such as Profit First by Mike Michalowicz.

So what is the secret to wealth creation? In simple terms if we are working and earning reasonable money then we can all create wealth by following a set process:

  1. Put at least 1/10 of your income aside to initially clear any debt you have and then to invest.
  2. Budget your expenditure to live off the remaining 9/10 of your income. There will be some pain but Parkinson’s Law will come into play!
  3. Once your debt is cleared invest your income.
  4. Do not invest in anything risky. Risky means anything you are unfamiliar with.  Use experts or invest in things you know about.
  5. Make your home an investment – try not to rent.
  6. Invest for your future and let your savings work for you.
  7. Above all, remember to invest in yourself – training courses, books, and controversially to associate with the right people who are also in to creating wealth.

Associating with the right people is one which is often criticised but the reality is we are pack animals, we follow the crowd. If your friends are all into fashion and buying the latest clothes it is difficult to resist peer pressure. If your peers are all into business, investing and wealth creation you are more likely to be successful yourself.

The Richest Man in Babylon is a powerful book.  For those with wealth many of the quotes will resonate with you.

One example of a great quote is “men of action are much favoured by the goddess of good luck”. It is obvious but those who are successful are generally those who do not procrastinate, who do not worry about failure and in many respects consider failure as being just a stepping stone to eventual success.

Another example – “The Soul of a Freeman looks at life as a series of problems to be solved and solves them whilst the soul of a slave whines what can I do when I am but a slave”.  So true.

The good news is that if you are reading this post you are probably in business or a higher rate tax payer earning good money.  This in itself means that great wealth is possible.  The questions each person has to ask is:

  1. Are you prepared to live within your means and create a surplus to invest in your future?
  2. Are you prepared to distance yourself from friends and family who want to keep you down?
  3. Are you prepared to ignore the incessant message of consumerism and not frivolously spend your hard-earned wealth on items you desire but do not need?
  4. Are you prepared to create an expenditure budget and keep to it?
  5. Will you seek the help of experts, just give it a go yourself or look for get rich quick plans and find charlatans who promise you incredible returns but are the only ones making those incredible returns?
  6. Will you take action or will you just moan about your misfortune?
  7. Will you invest in yourself and develop new skills to increase your value?

We work with many clients to help them build real wealth and as part of this service offer simple straight forward but practical wealth planning where we can work with you to:

  1. Identify your personal goals and objectives.
  2. Review where you are now.
  3. Identify where you want to get to.
  4. Create a road map with an action plan which will include:

a. Preparing a personal income and expenditure budget.

b. Preparing a personal asset statement.

c. Reviewing debt and helping you to restructure debt where necessary.

d. Checking whether you and your loved ones are properly protected.

e. Introducing you to the right people to help you with protection and with your investments.

f. Discussing with you your personal development plan.

g. Providing you with tax advice to ensure that your wealth creation is carried out in the most tax efficient manner.

As part of this service we will carry out an annual review and if you need to accelerate your wealth creation we can set up regular meetings on a quarterly basis or more frequently if required.

This service is devoted to personal wealth and is very different from our business growth service which focuses on growing your business. To find out more about how we are helping businesses to grow please visit our business growth page on our website.

If you are interested in wealth creation then please talk to Mark Friend or Andrew Grant or contact your line manager.

The content in this blog is correct as at 30/09/2020. See terms and conditions.

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