Why do rich people go broke? Why are people who were rich now broke? You might have heard that question and are not too sure what the right answers are. You might have the answers but want to know more, whichever part of the divide you belong; you are in the right place.
I’ll like to start by differentiating rich people. I like measuring wealth by how much asset one possess, not primarily how much money one has. I believe it’s true that assets transform into money. Assets can be intellectual, tangible, etc. Also your asset increases your cash flow( the amount of money flowing into your account monthly or weekly), it also helps improve your capital gains (the money you get on investments such as shares, bonds and other stock investments). So in differentiating between rich people I’ll like to categorize them into
- Intellectually rich
- Financially rich
The first above does not imply those people who are A students in school, it’s those individuals who are creative, those with talents and people who build or have intellectual properties (e.g. Mark Zuckerberg, Bill Gates, Steve Jobs, Larry page etc), So I conclude that intellectual wealth leads to financial wealth, consequently, those people who are intellectually rich never go financially broke, unless of course when they become intellectually broke-and how possible is that?, these set of people seldom go broke. However the reverse is the case for the second set of people, those who I call “Just financially rich”, a typical example is a salary earner, a sport star etc.
Categories of people who mostly go broke
I have been able to identify without doubt a few categories of people who mostly go broke. By this I’m not implying that anybody who falls under the category would be broke, I just checked the statistics and found these ones have a higher frequency.
- Sport stars
- Lottery winners
- Those who inherited their wealth
Why do Rich people go broke
Find below the reasons why many people you know were rich are now broke, or why they are on the verge of becoming broke.
The first and major reason why many rich people go broke is due to poor financial intelligence, no thanks to our schooling system which would teach us to work for many and not to make money. When money then comes beyond what was expected, the individual who although can handle heavy mathematical numbers cannot handle the heavy amount, consequently he/she returns to being broke. If our schools would include lessons on money and how to handle money, this problem would reduce by a wide margin and things in this aspect would get better.
Pride is another reason why rich people go broke. It is said that pride goes before a fall. When some people get so much money than maybe deserved or worked for, they resort to being proud and give in to haughty attitudes. When you start despising your master because you’re getting more than he is, then downfall is not far away.
Another reason I’ve found why rich people go broke is indecision. It was a wise man who said that “great men are quick to take decisions are the slowest to change them” Indecision have cost so many people great opportunities. And this also point again to poor financial knowledge. With a sound financial knowledge one is apt to making very good decisions, and swiftly too.
Procrastination and self indulging is yet again another reason why rich people go broke. I’ve discovered people procrastinate because of the pleasures of the moment. So I’ve related this to indiscipline individuals who would not do the right thing at the right time. Those who also postpone what should be done for a later date. Imagine what happens when you don’t go in time to submit your bid/quotation for a contract , even if you are the most qualified, someone else who gets there earlier and knows how to make his/her case would take your place. I also see this as a problem of those who do not know how to practice delayed gratification. Procrastinators first enjoy pleasures which should come last.
Poor foresight is another reason why rich people go broke. To succeed, one needs the ability to look into the future, new developments, areas where improvement is necessary, strategies needed to be dropped in business and those needed to be developed. A lack of this ability is one reason the rich go broke. The presence of this ability helps you to be a major force in innovation. If you don’t have this in place, the market will leave you behind.
Zero hindsight is another reason why rich people go broke. The past is the library of the present and prophet of the future. If you don’t study your mistakes of the past which made you lose money, you are bound to keep losing more money, when you have a sound hindsight, you’ll understand the cause and effect of past events and you’ll learn from it to forestall future occurrences.
The past is the library of the present and prophet of the future.-bisco Ibitade
Gambling is another reason why rich people go broke. I believe gambling is for lazy people. While some people make a fortune from it, most others are turned to a wretch through it. Being a vice, it becomes a bane and a consuming habit.
Poor family relationship is, refusal to assist people(which is also an extension of pride) are also reasons why rich people go broke. Many of these traps are not clear to these people until they fall into it, which is one reason why financial education is strongly advice, and it should start early in life so the mind can start developing.
Over to you. What other reasons do you think makes rich people go broke? What are the ways you think people can avoid going back to the broke state of their lives? Share your thoughts on this with us using the comment area below.
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