Parkinson’s law and lifestyle inflation

Have you heard of Parkinson’s law? The principle states that “work expands in order to fill the available time.” For example, if you organize a meeting at work and set it for 1 hour (as are most meetings), the meeting will last for the whole hour, even if the objectives are complete after 30 minutes.

In productivity circles, Parkinson’s law is often used as a tool to manage time, but I believe it applies equally to managing your money. In this case, Parkinson’s Law may be rephrased to read: “Spending expands in order to consume available money.” 

Lifestyle inflation explains this phenomenon. Even if you get a raise at work, you may still be left with no extra money to save. A $100 shopping trip is more likely to result in you spending $100. You are also expected to spend thousands if you have that much money to spend.

Parkinson’s law and lifestyle inflation

In the case of lifestyle inflation, a person’s spending increases along with their income. Parkinson’s law is also consistent with this concept.

Imagine you make $1000 a month and spend $1000 a month. If you get a raise to $1100, you should spend $1000 and save the other $100. Unfortunately, most people will spend the extra income. (“I’ve earned it! I deserve it!”)

In the context of lifestyle inflation, factors that were once “luxuries” become “necessities” once you have more money available, so you increase your spending.

More money, more spending!

Many articles in the mainstream media feature wealthy people who are still in debt. They are expanding their consumption habits as they accumulate money. Most people unconsciously think that more money means more spending rather than more saving. You don’t see the money people have, you see the money people spend. (Remember “big hat, no cattle“)

Even if you consider Parkinson’s Law and Lifestyle inflation, not good ways to save money, you can still benefit from them.

Taking Advantage of Parkinson’s Law

In the same way that you can use productivity hacks to master your time management, I will explore some techniques that you can apply to control your spending using Parkinson’s law. 

Lifestyle inflation and Parkinson’s law can affect your wallet and budget in ways that you can begin taking action today. 

Lifestyle inflation Tips  

• Going cash-only is one solution. When cash is limited, it can be spent only up to that amount. This is one reason why budget envelopes are so successful. In this system, cash for each budget category is taken out of the bank and divided into envelopes. 
• If you get a raise or a new and better paying job, try to make it on the same amount you lived before. This is also true if you are fresh out of college. This will likely be the most violent situation of lifestyle inflation temptation.
• You must be disciplined if you want to become financially free. This means creating a budget and sticking to it. You should be deliberate enough to know where your money is going to make sure that expenses rise to meet your income.
• Automate savings. If you get a 3% raise put it immediately into retirement savings. If you don’t have a retirement account, OPEN ONE.
• Paying for your car loan is another great chance to make good decisions. Forget about getting another new car. You don’t need it. Yes, you deserve it but, no, you don’t need it. Change your direct deposit settings to put that amount into a different account. Not to your checking account. Put it in a brokerage account. Vanguard would be great. Or increase your retirement contributions by that amountt
• Same if you are lucky enough to have paid off your mortgage. Maybe a chance to buy a rental?

Final Thoughts on Parkinson’s Law and Lifestyle Inflation

You can control lifestyle inflation and Parkinson’s law if you are intentional with your money. Make less money available if spending increases to the point where it consumes the money available. To control your spending, don’t rely solely on willpower. Making spending money more challenging will likely lead to less spending.

I hope these tips can help you hack the monetary version of Parkinson’s law so you can control lifestyle inflation spending.

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