📉Why Rich People Go Bankrupt

There’s never an end to money problems.

It is at the crux of all our dilemmas in life.

No money no problem right? 

The only problem then is the economy would be dead and we would have more problems.

Yet, having too much is as bad as having too little.

One of the reasons so many newly rich people suddenly go broke is because they used their old money habits to handle their new money problems.

Ever wondered why 80%+ NFL, NBA, celebrities, sports stars and lottery winners go bankrupt in the next few months?

They’ve never been accustomed to making that much money and a lump sum causes emotional euphoria!

Similarly to the high you get when you eat too much sugar, money plays the same inverse affect.

Mixing emotions with money is a recipe for disaster.

So why is it so much easier to lose more when you own more?

First off, you think you always have more than it seems. Income/state/consumption tax to management fees are all blown out of the water. You assume you never have to worry about them until you realize they eat up into a majority of your earnings.

If you’ve never made more than $70k fresh out of school at your IB banking job and are hit with not only a $20k bonus and $50k raise, there’s no doubt you will spend at least half of it. You will convince yourself you are young, innocent and only get one shot at life so what are you waiting for!

That’s a recipe for disaster. Yes, you need to reward yourself and not just work to save, but being grateful for what you already have and living below your means will allow you to enjoy the fruits of your labor and also save for the future

You would think that rich people would never go back to the bottom.

It’s truly upsetting when it does and happens more than you think.

Michael Jackson, Nicholas Cage, Mike Tyson, Lindsey Lohan to name a few are the most famous people to hold the coveted title on Insider Magazine for spending almost all of their fortune, going into massive debt and owing more to the IRS than what’s under their name.

They were all blinded and there’s a reason to it.

They never grew up with money. If you aren’t exposed to it early on, you don’t understand how it changes you life and the pitfalls of having too much.

Moderation is key in everything.

Too little is scary, too much is dangerous.

You won’t become a better person or earn more on top unless you take advantage of it in the right way.

Even if you did grow up with money, if your parents didn’t work on Wall Street, spoiled you or never put you through personal finance at-home bootcamp, then you would have the same mentality.

See a pattern?

It all comes down to financial literally.

To Freedom and Beyond…And Then Back Down

After a certain income, $75k to be exact, your happiness will plateau. Yes, when you buy that car or fancy new jacket you will get excited for a few moments but after that, your happiness will become stagnant because you realize it’s just more junk taking up space that you have to own and impress people with every time they come over.

It isn’t progressing your life and you just have to worry about keeping it intact, sheltered and secure.

It’s a hassle not a luxury and no one realizes it until they get the chance to purchase something they desperately want.

So how is it possible to go from rich to broke so quickly?

I mean, you must think that someone must be really, really dumb to go from half a billion to 0 like Mike Tyson or 50 Cent the rapper.

Although I don’t know the exact steps since we don’t want to go into depth advising something that shouldn’t be done, there are many outlets and it simply comes down to spending.

The more you buy, the less you own.

Simple as that.

After establishing the key principle of spending and the emotional turmoil of lump sums, let’s identify how to NOT make spending so joyous because for the most of us, spending is 10x easier than saving.

#1 Don’t impress anyone except yourself

#2 Invest in things that will propel your future (most importantly yourself)

#3 Focus on character not looks

#4 You already have what you need

Clearly some people did not follow these easy steps to financial freedom.

There’s no math or graphs involved, just logic.

Let’s understand the twisted heads of the rich and famous and why they went bankrupt so easily all inspired from Robert Kiyosaki’s, “Rich Dad Poor Dad”:

#1 People who have grown up without money have no idea how to handle money

#2 When people come into money, the emotional euphoria is a drug that boosts your spirits

#3 The hardest thing for many people is to say no to people they love when they ask to borrow money

#4 The person with money suddenly become an investor with money, but without education and experience

#5 The fear of losing increases

#6 The person does not know the difference between good and bad expenses

#7 It’s not how much you earn/make, it’s how much you keep

Going broke is easy. Just spend everything. There’s nothing else to it. Taxes are a big chunk but not if you are strategic where you live, what you sell and of course, buy.

If you stash your fortune into a low-cost index fund with barely any upfront work not even needing to know the types of investments inside, it will consistently outperform and go through a bull run year over year since the major indexes always go up. If you are a teacher or janitor making minimum wage you could easily be better off than any billionaire out there who spends his fortune to only loose it.

With more work trying to impress others, time the markets and fantasize over something that requires more hassle, you get nowhere.

Money is dangerous and so is your mind. Keep it in order before you loose everything.

It’s not that hard.