Why Rich People Go Bankrupt — And What They Did To Survive
Just because you are rich now does not mean you will be wealthy forever. It has been said that wealth is not about how much money you make, but how much you are able to keep. Here are some reasons why some rich people do not manage to stay so forever.
Those Who Grew Up Rich Have No Idea How to Handle It
Many people who grew up rich know nothing about money, except that they maintain expensive lifestyles without any idea how to keep it where it is supposed to be. While growing up poor can be good or bad for spending habits later on, growing up rich can also be a big problem once you grow up.
Growing up rich does not necessarily mean having the right habits or being financially intelligent. If a person is not groomed to handle large amounts of money, he or she will either just go ahead and spend what they want or lose all of it in any other way. It has been said that it is not money that will make you rich, it’s being financially intelligent.
They Feel Invincible
Many rich people have Cinderella stories; but this does not mean that they get to be rich all their lives. Statistics show that about 70 percent of those who win a lottery or become millionaires overnight end up getting broke in just a few years.
Steve Lewitt, CEO of Chicago based Wealth Financial Group, says that these ordinary people suddenly get extraordinary. They get euphoric and they lose all sense of reality. All of a sudden, they think they are invincible and powerful. This is when they lose it all and burn their money on things that do not matter, while losing sight of the fact that their money is limited.
They Do Not Know How to Say “No”
If you think getting rich is the cure all for all family and friendship problems, this is absolutely wrong. A lot of families, friendships and relationships have broken up when somebody suddenly gets rich. One very important skill to become rich teaching yourself how to say “no” to yourself and to the people that you value in your life.
Many who get rich just go ahead and spend right away. They get expensive houses, cars and other big purchases that are not worthwhile. This leads them to get deeper in debt since they suddenly have a lot of money, more than they are comfortable with.
They Do Not Seek Help
Many wealthy people are ordinary individuals who have suddenly signed a big sports contract, won a lottery or, somehow, money just fell out of the sky. While their expenses can just keep flowing, one big mistake is that they manage their money themselves. One easy solution for this typical issue is to get a third party to act as gatekeeper. This will help intercept the flood of requests from loved ones.
A huge number of lottery winners and other overnight millionaires do not get any help at all. There are a lot of people who are equipped and can help manage with these issues, so money does not go down the drain like it is nothing. Most of the time, what happens is they surround themselves with people who have spending habits that are much worse.
They Have Low Financial IQ
There are some people who get rich so quick, that they get too high strung and suddenly think that they are so good at investing. But how good exactly are they? Many actually never even had money before and just got lucky. When somebody gets rich really fast, people will come knocking and promising great investments, but just because they say these are so does not mean that they really are.
Another thing sudden millionaires are not really skilled at is distinguishing a good expense from a bad expense. This is one of the most important lessons when it comes to financial IQ. Many rich people blow their money on liabilities, or things that further take money out of your pocket. On the other hand, truly rich people spend money on assets, which are things that increase your cash inflow or somehow are of good value.
Making money is one thing and getting rich is another. Just as many other disciplines, getting rich is something that is to be learned. What do you think of these tips? Share with us your thoughts in the comments below.
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