Danger Spots when Getting Rich Quick!
December 03, 2010When I read the article, Getting Rich Quick: True Tales of Overnight Millionaires, I had a few thoughts (which means that I’ll probably write mores blogs about it). The first thought was, “All I need is that one great idea and I’ll be in the ranks of overnight millionaires.” Then, I thought about how long it takes to be an “overnight success,” and how many instant millionaires (lottery winners, recipients of lawsuit proceeds, inventors, etc.) I have seen during my career and how many have blown through the money as fast as they received it. Getting “rich” is difficult, but staying there is even harder.
One of the major obstacles to remaining wealthy, once your wealth has been acquired, may be the people you love. There is nothing like an abundance of cash being available (and people knowing that you have it) to bring out a seemingly endless line of people who need “just a little help.” I’m all in favor of helping those less fortunate and those you love, but I’d hardly call helping your best friend from 2nd grade (who you have haven’t seen in 25 years) start a music label anything resembling a charitable endeavor. People are often amazed by the number and types of requests they receive from people they have known their whole life when a sudden inflow of money occurs. Human nature is to want to help, but there has to be limits! Helping friends and family is a good thing, until it’s so much that it’s the worst thing ever.
Spending on extravagant purchases is another way I have seen “instant millionaires” become candidates for bankruptcy in a short period of time. Should you celebrate? Absolutely! But in all things, moderation. The quickest way to lose a fortune is to spend a fortune! There is an abundance of stories about people who have lost their fortune by spending on houses, cars, jewelry, gifts, travel, etc. Even those with significant wealth need to have some spending discipline. Budgeting isn’t just for “the rest of us,” it matters to millionaires too.
Another area that “helps” people lose their wealth is poor financial advice. Unfortunately, the Bernie Madoff scandal only served to illustrate that not all people in the business of money management are honest and ethical. The overwhelming majority of financial planners/ financial advisors are of the highest integrity. Those who aren’t can tarnish the reputation of the industry, though. Poor advice from tax, legal and financial professionals has been ruinous for some. Here’s a quick article on how to choose a financial planner. The time-honored expression “if it sounds too good to be true, it probably is” should be a starting point for evaluating advice. I’ll address this topic in more depth in a future blog, too.
Should you, through your hard work and effort, become an “overnight success” (or if you’ve already built your wealth), beware of a few danger spots. Your desire to help people you know and love, your “new” spending habits, and poor financial advice are the fastest ways I have seen people lose the fortune they made. If you can successfully avoid those traps, the hard job of staying wealthy can be accomplished.