Being rich does not necessarily mean you have financial education. So when people say that ‘when I get rich all my money problems will go away’, they happen to be far away from the truth! The fact is, with more money comes newer problems and without proper financial education, you cannot keep the money with you. Lottery winners going broke, million dollar worth athletes going into debt, examples are numerous all around. The reason being that once people have money, they do not know what to do with it! Here are the top 5 reasons why rich people go broke:
Not growing up with money
Individuals who have not grown up seeing money, and have become rich later on in life, do not have a clue as to how to handle it. Either they stash the money away in bank accounts or lose it in unwise gambling, etc. Him/her neither having a past of handling huge sums of money, nor having the right financial education ends up not doing anything constructive with it. Hence, the proverb – Money does not make you rich, financial education does.”
The emotional euphoria of it all
Let’s face it, money gives a different sort of a high to people. Individuals start thinking they are very clever and everything that they are thinking is right while in reality they act more stupid then they think! Feeling that the ‘world is mine’ often leads to people spending all their money on luxury that they have always dreamt of, losing it all in the process.
Lending and donating to loved ones
When you have a lot of money, it becomes very difficult to say ‘no’ to loved ones, friends or family who are a little sort of cash right then. Infact people can’t even say ‘no’ to themselves and spend money on excessively expensive things so saying ‘no’ to loved ones also becomes very difficult and you can’t stop yourself from going further into debt with more money!
Investing without financial education
When people become rich, by default they think themselves to be extremely financially savvy! This is of course the worst possible mistake to do! It might well be the case that they suddenly got lucky and got rich! So when you get rich, you start investing in whatever comes your way, whatever you feel would work without the right education and analysis. But remember, just because you can afford to make big investments doesn’t mean you should make them and lose all your fortune in the process. Again, getting financially educated is the right way to go!
Not knowing the difference between good and bad expenses
Individuals usually make more bad expenses than good ones, especially when they are rich. The difference between the two is simply that good expenses are used to buy assets that create more assets in the future. Bad expenses on the other hand are expenses that you use to buy liabilities that eat up your money without producing any asset. Houses, cars, etc are all actually bad expenses since realistically speaking, all they do is gobble up your money without really producing other assets for you.
So now that you know how rich people go bankrupt, time to hit those brakes! Step back, take a look at what you have and then get yourself financially educated so that you can use your money to make more money, instead of blowing it all up! Best of luck! Stay rich. Stay happy!