July 15, 2024

Vagmare.com

The Intersection of Information and Insight

Five reasons why rich people go broke

4 min read

We have all heard the saying that a fool and his money are soon parted.

I know some smart reader will think –

How did the fool get his money in the first place?

But putting that aside, you’re likely to have come across a few people who despite having the trappings of being rich, seem to keep throwing their money at bad investment schemes and always losing money.

In my many years helping thousands of successful and not-so-successful investors and businesspeople, I’ve seen many of what some would call “rich people” lose much of their money for no “apparent” good reason.

And it’s not the market conditions – that’s  ] not the problem — they just can’t seem to hang on to their money, let alone make it grow.

So why are some people, particularly those who have a reasonable sum of money,  destined to lose their money?

Well…it has very little to do with fate and everything to do with their bad money habits and their “poor” mindset.

Here are some of the reasons I’ve seen some rich people go broke:

Some of these include:

 1. They have never had to manage a large sum of money before.

I’m sure you’ve heard how many lottery winners have lost most of their winnings after a few years.

I’ve seen much the same happen to those who inherit a large sum of money.

These people have earned an average salary for most of their life and then come into a windfall.

The problem is they’re ill-equipped to handle their new bank balance and it quickly dries up  — usually after they have bought the expensive car, or a similar vanity purchase or depreciating asset.

If your personal development doesn’t catch up with your bank balance, its likely you’ll soon be parted from your money.

2. They are too generous

There is nothing wrong with helping friends and family pay for things here and there if you can afford to help out, but often people who have come into lots of money don’t know where to draw a line.

Friends from their past seem to show up wanting them to invest in their new business venture and they may feel obliged to help.

Perhaps a cousin has a huge credit card debt that needs wiping.

Bad idea.

Business is business, and you need to look after your money rather than focusing on giving it away otherwise, pretty soon, there will be nothing left to be generous with.

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