How to avoid losing all your money

I was inspired to write this post after reading about NFL athletes who lost all the millions they earned during their career. It is inconceivable to most that someone who earned $80,000,000 in his career could now be bankrupt. Though a lot of people will never even make the amount of money these men have squandered, I figured the same advice could apply to everyone. We already know that we have to save and invest right? Well it is not enough to just put your money in an investment, there a few lifestyle changes you might have to make in order to avoid becoming penniless. Whether you are worth $1,000 or $1,000,000,000, here are some more tips on how to hold on to your money.

1) Reduce your responsibilities: 

Some people make a good living but never seem to have enough money left at the end of the day. These people are not necessarily lavish, they just happen to have too many responsibilities that eat up their money.

If I was writing this for athletes, this tip would have been titled “stop having so many children!” Some of you regular folk may not have the baby mama/child support trouble these athletes have,but you still have things and people you have to care for. I am not going to lecture you on reproduction, okay that’s a lie I am. By all means have 20 children, but be absolutely certain that you can provide for all of them. I always look on in amusement at billionaires who have three children and their drivers who have 10. Yes the bible says go forth and multiply, but it is necessary to employ common sense. Children are expensive and some people work their entire lives trying to provide for their children. While this sounds noble, it can also be draining and can even put your children at a disadvantage. You may be able to send your two children to good schools, but add 5 more children and they might have to forfeit a quality education.

Children are not the only responsibilities a person has. It may be necessary to get rid of your entourage aka your freeloading buddies. It is a commonly accepted fact that people with money have a lot of friends. Entertainers, for example, always have a group of adult men shadowing them, drinking copious amounts of expensive champagne, wearing gaudy jewellery and living life on the entertainers budget. When these entertainers inevitably go broke, their dear friends diffuse to whatever homeboy has just made it big.

When you get money everyone wants to be your friend.The person who bullied you in primary school now gives you a friendship bracelet. They always want something and for whatever reason, it may be difficult for you to say no. Their problems are then shifted from their shoulders to your head.  You earn a good salary, but after paying for everybody’s rent, school fees, medical fees, weave, cable bills e.tc, you find that you barely have any money left to save. It is okay to say no and ask people to fend for themselves.

Now I am not saying that you should not help people. What use is money if we cannot help those dearest to us? I am saying be careful and do not bite off more than you can chew. Helping your dear friend with money for this month’s rent is not the same as buying rolexes for all 30 of your closest friends. That may be acceptable if you are Bill Gates, but you are not, so hold on to your coins.

2) Be wary of sweet investments:

We always talk about saving and investing as the right way to safeguard our future. A lot of people try to be prudent and invest their money and still end up bankrupt because they chose the wrong investments. It is not easy differentiating the wheat from the chaff, but if it sounds too good to be true, it probably is. Don’t be in a rush to throw your money into shady investments that promise you unrealistic returns in a short period of time. Calm down, do some research, maybe even get professional advice (from a reputable professional, not your cousin Sam who took one finance course in freshman year). Whatever you do, do not fall for the sweet talking mutherfellas who are selling you dreams.

3) Have foresight:

A number of people live paycheck to paycheck. This does not mean that they earn a pittance, it simply means that they lack foresight. They cannot see beyond today and the money they have at the moment. If they earn a million dollars today, they do not think about their lives 10 years from now. As far as their concerned, the money will continue to come forever. This is why some athletes become broke just a year into retirement. The money stops coming and they have no idea what to do with themselves.

It is so important to have foresight. Think about the future. It is nice that you have money now, but what happens if your current source dries up? Will you still have the same cash flow in ten years? If not how will you sustain yourself then? Enjoy life by all means, but do not forget to think about the future.

4) Live below your means:

I am not asking you to become a miserly grump who recycles urine, I am saying that your incoming cash flows should be more than your outgoing cash flows. Stop trying to keep up with the Kardashians. If you earn $5,000 a month, you have no business renting a fancy apartment for $4,000. Even a billion dollars can be reduced to a mere pittance if you do not live below or at least within your means. A person who earns $40,000 per annum may be in a better financial state than one who earns $1,000,000 per year. It all depends on the person’s spending habit. If you have a million dollars in assets but 50 million in debt, are you really better off than the person who has $100,000 in assets and $0 in debt?

While it might be tempting to splurge and enjoy life, it is imperative that we put in boundaries. Do not buy things you do not need to impress people (who will not be there to bail you out when the cash runs out).  A rule of thumb is:

If you cannot afford to buy two of it, you cannot afford it.

I can’t remember where I heard this from but it is a good mantra to live by. Just because you are worth $1.5 million does not mean you can afford a $1 million Bugatti.

5) Rein in your youthful exuberance:

Ah youth! A lot of problems people have can be traced back to mistakes they made in their youth. Athletes barely out of their teens are handed millions of dollars and are expected to be careful. Ha. Of course they are going to buy rolexes and horses and cars and spacesuits and anything they don’t need that can be used to impress.

For us regular folk, the mistakes of our youth include racking up credit card debt, spending money on a bunch of unnecessary frivolities and making unwise decisions. Some people smarten up on time, while some fritter away for much longer until it can no longer be blamed on youth but plain stupidity.  This is where having foresight becomes important. Your twenties are the best time to start investing for the future. The sooner you start to save and invest, the longer your money will have to grow and enjoy the benefits of compounding.

6) Ask for help:

Do not assume you know it all. Do not be afraid, ashamed or too proud to ask someone for help. Make sure the person you are asking for help is not more clueless than you are. If you get a financial adviser, make sure it is a reputable one with sufficient experience and skills. You can even ask the internet for help, there are so many ways to get quality finance information and advice online.

7) Learn from the mistakes of others:

A wise person once said “Only fools learn from experience, the wise learn from the experience of others.” While it is important that we learn from our mistakes, some of these mistakes can be avoided altogether by learning from others. You are not the first to tread a certain path, others have gone before you. Read about their experiences, ask them directly if you can, learn what they did wrong. No two journeys are the same and you may still have to make your own mistakes, but learning from others can make your journey considerably shorter and easier.

8) Do not procrastinate on your bills

Pay your bills as they come, rather than putting them off and waiting for them to accumulate. When you let your bills accumulate it becomes harder to pay them at once and you may not even have the same cash inflow you had. Then you find yourself in trouble. It is important to pay your taxes! Do not wait for the IRS or whatever tax agency your country has to come get you.It may also be wise to pay off your mortgages, car notes and other payments. It is so strange that a person who earned over a hundred million dollars could become homeless as a result of him defaulting on his mortgage payments. Why does such a person still have a mortgage? If you can afford to pay it off, then pay it off.

9) Stay away from drugs: 

Few things drain a person’s account faster than an addiction. Heroin, Cocaine, Alcohol, Netflix, Starbucks coffee and so on. Drink responsibly in moderation but stay away from heroin et al. You will go from just trying it out this one time to selling your spleen for a gram of cocaine. Don’t do it.

10) Work hard: 

Have a strong work ethic. Don’t become lazy and start to slack up. You might even need to work harder once your finances start to improve. You have to work hard to get rich and work even harder to stay rich.

Honourable mention: Choose your partner carefully

In addition to excessive breeding, a lot of formerly wealthy people lost their money through multiple divorces. Marriage is not easy and for a lot of people, till death do us part is really till divorce do us part. Some people are hopeless romantics, and they get married over and over again in a bid to find “the one”. Divorces can be very expensive and if you keep on getting divorced, it will only be a matter of time before your assets are depleted.

What other tips do you think should be on this list? Let me know.

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