Why Ends Don't Meet

In Uganda there is a term which is very common with the employed, "trying to make ends meet." During the first 2 or 3 months of employment, the employee is usually able to live on their salary until the next pay day. As the months go on the employee's cost of living increases and the money there are earning is no longer sufficient to cover the cost of living until the next pay day. This creates a situation where there is more month at the end of the money, hence the effort to make ends meet i.e. to have the salary cover expenses until the next pay day.

This predicament is explained by Parkinson’s principle which is one of the best known and the most important Principles 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.

This principle 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 incomes. 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.

¨ The first corollary of Parkinson’s Principle says: Financial independence comes from violating Parkinson’s Principle.

It is only when you develop sufficient willpower to resist the powerful urge to spend everything you make that you begin to accumulate money and move ahead of the crowd.

The second corollary of Parkinson’s Principle is: If you allow your expenses to increase at a slower rate than your income, and you save or invest the difference, you will become financially independent in your working lifetime.