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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  1. John S @ Frugal Rules

    There was a program on ESPN a few weeks ago about pro athletes who went broke. While it was sad, it was not the least bit surprising. So many of them were that way because of terrible habits and “friends” who wanted them to bankroll some hair-brained idea.

    • Brick By Brick Investing

      It was called “Broke” by Billy Corben (Great director for documentaries)! Yes John that was a great one to watch. I recommend EVERYONE watch that special it shows two things in my opinion. 1. How the lack of financial knowledge and education will guarantee your future of being broke. 2. How imperative it is to keep tabs on your “financial advisor.”

  2. AvgJoeMoney

    Fun video. Thanks for sharing. Why people think that more money means that you shouldn’t have a budget or properly choose your investments is beyond me.

  3. Very well shown. To me it is simple, we all have limits regardless of where we start from. Nothing in life is infinite including money.

  4. While I don’t have any specific individuals to share, I can say that in general, there are some wealthy people that get into financial trouble for a couple of reasons: 1) creating a lifestyle based on a high level of cash flow, which isn’t sustainable and then they can’t adjust downward, and 2) marrying the wrong person (or people).

  5. Brick by Brick: Thanks for letting us know the name of the show.
    Miss T: Always best to keep things simple, yes?
    Squirrelers: I wonder if bad advice from lots of leeches attracted by new found wealth plays a role too?

  6. NuNu

    Rick Ross seems like the next candidate he buy diamond, gold & expensive cars u have to pay taxes on that stuff every year not including your other bills will catch up to how many cars do you cars learn from other people mistakes!!!! I’m Not trying to player hate find examples such as Mike Tysons, Scotty Pittman just to name a few

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