According to a study by the American Institute for Financial Education, 70% of lottery winners end up ruined in less than 7 years. And 78% of professional NFL football players (some of the highest paid professional sports in America) go bankrupt in less than 5 years. Meanwhile, individuals who do not have a quarter of their fortune prosper and increase their income every year. How is it possible? The difference between the two groups lies in the acquisition of an essential skill: that of knowing how to manage one’s money.
A lot of people are looking for ways to try and make a lot of money. Fewer people are focusing on making the most of the money they already have. It is, however, an essential skill (which, moreover, is not taught at school). A man who has developed a sound management of his personal finances can live without working all his life on less than a million euros. A man who has not developed this skill will be able to receive all the money in the world, and still end up short each month. A visit to vimeo.com/jamesscholes1982 happens to be perfect in this case.
What you will learn in this article:
How and why do stars end up ruined?
What do 50 cents, Mike Tyson, Burt Reynolds, Pamela Anderson, Michael Jackson, Nicolas Cage, Lindsay Lohan, and Marvin Gaye have in common? They all declared bankruptcy despite annual salaries of several million dollars. How is it possible? This is what we will see in this first point.
Celebrities (and lottery winners) are interesting examples to study for someone who wants to know how to manage their money because they are good examples of what not to do, and in finance learning from the mistakes of people. others always cost less than learning from your own. In addition, the mistakes they make are most of the time the same as those of lower-income individuals, it is simply that they make them on a very large scale which makes their bankruptcies more spectacular (and publicized).
So what are the factors that brought all of these extremely wealthy individuals to ruin? In truth there are three.
First factor: unreasonable spending
A problem that affects both rich and less rich. The economy is done in such a way that, no matter how much you earn, you always find a way to spend your money. The major problem with both highs and lows of incomes is not just buying too much stuff, but underestimating the level of current expenses associated with the goods they buy. Buying a car is not a one-time expense.
You must adopt the new habit of saving a percentage of your active or earned income, and from there, worry about increasing your capital, without mixing it with your personal money, and the best recommendation is that you follow a Personal Investment Plan (Financial Plan) , to help you keep track of your progress, keep you focused and motivate you to achieve everything you want from a financial point of view.