There is this theory known as "Parkinson's Law."
In the context of finance, it means "the more you EARN, the more you will SPEND."
Many of us were illusioned with this myth, "If this person is a director of a company, this person is a big shot, this person is running his own business.... this person must be filthy RICH!
This person, for sure, has LOTS and lots of money."
My humble experience as a financial associate tells me otherwise.
The MORE the person earns, the HIGHER his expenses will be.
Come on.... Lets face it!
" Usually when we are earning $3000/month, we will have a normal house, a normal car, eat in normal restaurants and go holiday in nearby countries.
However, when our earnings grew, say $5000/month, without us knowing, we will then get a bigger house, a more sporty car, eat at expensive restaurants and travel further."
This is what we called Parkinson's Law.
This theory does not only happen to other people.
I am guilty of it too! :(
Don't feel good right, earn so much, yet spend so little. :P
So... What can we do, to counter and avoid being a victim of Parkinson's Law?
Financial advisors across the board have always emphasize in savings at least 10% of your income.
You must always remember, when your income increases, your savings should also increase too, to avoid Parkinson's Law.
Maybe when you earned $3000, you save $300 (10%).
However, when your income increases to $5000, your savings should not remained at 10%.
Increase it to 20% ($1000).
With this method, you still can enjoy your increment in your income without feeling guilty ($4000), and you still be able to save more and fight Parkinson's law ($1000) at its root! :)
Helmi Hakim is a young, promising, exuberant financial associate in Singapore. Passionate in helping the mass to achieve financial literacy, he dedicated his blog to the public and share with them his knowledge on Insurance, Savings and Investment.
Do visit his blog at http://www.helmihakim.com
Article Source: http://EzineArticles.com/?expert=Helmi_Hakim
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