Parkinson’s Law, III

Professional Athletes

 

Vocabulary

earn	rookie	along the same vein
rate	stuff (2)	lion’s share
extra	income	assortment
loser	shame	efficiently
lazy	net (2)	ingenious
thrill	disgrace	look down on
flashy	junkie	champagne
debt	facade	accomplish
feat	to part	run up (2)
ego	revenue	come up with
hit (3)	league	bankrupt
insure	mansion	according to
jock	tendency	file for bankruptcy
resist	reward	speculative
alert	fraction	inside out
guy	fool (2)	chances are
failure	convince	acquisition
boost	gamble	broke (2)

 
 
 
 

Earning and Saving

Earning more money is the best way to build wealth — so long as you don’t spend it as fast as you make it.

In other words, the secret to getting wealthy efficiently is to:

1. Increase your net income.

2. Save the lion’s share (at least 50%) of any increase in income.

The Majority

Most people don’t do this.

As their income rises, so too does their spending. Some actually spend more than the increased amount money they make.

Why?

Because having extra things — a bigger house, a newer car, and assorted luxury toys — is what we’ve all been told wealth is about.

We work hard to buy this stuff. And then we are happy. The more stuff we buy, the happier we are.

Conversely, not having nice homes, fancy clothes and flashy cars, it’s a considered a shame; a disgrace.

It means we’re failures … losers … poor … lazy … stupid … nobodies. Everyone will look down on us, and no one will be our friends.

That’s certainly true in Hollywoodland — and perhaps in your own neighborhood.

Spendthrift Boxer

But moving beyond the facade, spending more on “happy” stuff is really a junkie’s habit: to get ever greater thrills (in this case, ego thrills) you need to take ever bigger hits.

Mike Tyson is a perfect example. As a champion boxer, he had career earnings of over $400 million. And yet he ended up tens of millions of dollars in debt.

He accomplished this feat by spending his money on $2 million gold bathtubs … $3.4 million worth of clothes and jewelry … and two Bengal tigers that cost $55,000 per month to feed, train, and insure.

For transport, Tyson parted with millions on 110 cars such as Bentleys, Ferraris, Lamborghinis, Rolls Royces, Mercedes Benzes both for himself and as gifts for friends.

A house in Beverly Hills, one of several, cost him $7 million.

Iron Mike also made some “investments” and ran up a multimillion-dollar bill with the IRS (Internal Revenue Service, the tax collecting agency of the US government).

He is hardly alone.

Football Stars

Vince Young’s rookie contract with the Tennessee Titans football team provided him with a $26 million paycheck. Like Tyson, he came up with ingenious ways of spending it.

He has made dozens of big purchases. A typical one was a $22,000 airlines flight from Houston to Nashville (1,068 km).

Why $22,000?

Because he wanted some “alone time” so he bought every seat on the plane.

Terrell Owens has made about $80 million playing for the NFL (National Football League), but today, according to reports, he is broke.

Much of his income went to the usual things — mansions, luxury cars, big champagne bills — but a good deal of it went to “investing,” such as the $2 million he spent on a bingo hall.

His total return?

Zero.

Professional Athletes

These are not isolated examples. In fact, according to Wyatt Investment Research, 78% of NFL players and 60% of NBA (National Basketball Association) players file for bankruptcy within their first five years of retirement.

Lest you write this off as a “poor dumb jocks”, consider this: The average American has more than $203,163 in total debt (mostly due to the government) and less than $1,000 in savings.

Parkinson’s Law

There are several lessons to be drawn from this:

There is a natural tendency to spend more when you make more — otherwise known as Parkinson’s Law. It is also natural to want to reward yourself for earning more money.

If you want to become wealthy, you must be alert to this tendency in yourself and resist it.

Along the same vein, there is no relationship whatsoever between the value of toys and how much you pay for them. A $30 watch can look as good and work as well as one that costs $3,000 or $30,000.

Investing

Speculative investing is a type of gambling. The guy who convinces you to speculate will call it an investment.

But don’t fool yourself.

If you don’t understand a deal from the inside out, chances are you will lose 100% of your money.

Wealth Accumulation

Wealth acquisition has everything to do with increasing your net income and saving an increasingly larger percentage of it.

When you boost your income, give yourself a reward. Buy or do something fun.

But don’t spend more than a small fraction of that extra income. The rest you should put into savings.

Questions

1. The secret to becoming rich is very simple, at least in theory. True or false? What are the two steps?

2. Do most people save and accumulate money? What do they normally do?

3. Why do they spend “too much” money?

4. Mike Tyson is a very rich man. Is this correct or incorrect?

5. How did Vince Young fly from one city to another?

6. Most professional athletes are frugal and wise with their money. Yes or no? Are athletes the exception or are they ordinary in their spending habits?

7. What is Parkinson’s Law? How can it be countered? What is an example?

8. Does “wasting” money only involve buying expensive, luxury items?

 

A. What do your colleagues and neighbors do with their money?

B. What do professional athletes do their money?

C. Is it important to buy and own nice cars and homes in your city?

D. Do most people have lots of money saved up when they retire or are they dependent on pensions or social security?

E. What will happen in the future?