How Rich People Go Broke

Dec 12, 2012 by

man with empty pocketsHardly a day or certainly a week passes without a media story about the bankruptcy filing of some formerly rich person, often a celebrity or professional athlete, it seems. Like me, you may have wondered: What could have happened to all that money?? We “little people” tend to think that if we could just accumulate a certain amount of wealth, we’d be set for life. More than likely, the subjects of these media stories once thought the same thing.

Well, it turns out rich people tend to go broke for the same reasons people like you and me tend to go broke: Bad money habits, greed, and stupidity. Check out this 98-second video called “How Millionaires Go Broke” from Minute MBA:

Why People Go Broke Isn’t Complicated

Life’s simple see, at least when it comes to money. Whether you’re rich or poor, you have to do some fundamental things right, or you’re going to go broke, eventually. To review from the video:

  • Clueless Spending Habits  Also known as habitually spending more than you earn.
  • Bad Investments  Chase a big return by taking on a lot of risk and your capital has a high likelihood of going “poof.”
  • Family Matters  Serial philanderers, co-signers of kids’ loans, and lenders to brothers-in-law tend to go broke at a higher rate than those wise enough to avoid these sucker traps.

 

What About You?

Who’s Your favorite formerly rich, now broke person? And who do you think is a top candidate to one day become a member of this not-so-exclusive club?

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