Can you manage your money as well as you believed?
Many people think that with a large amount of money they can make even more money. They tend to underestimate the skills you need to make this happen. It’s true that if you have money, it is more probable that you will earn more money. But it is in no way a guarantee. If you are to suddenly receive a huge lump sum of money, do you think you can manage the money properly and increase your net worth? Are you sure?
Allow me to point you to this article, 8 Lottery Winners Who Lost Their Millions. Eight people received a large sum of money, but guess what happened? Instead of having more money, they ended up losing everything. What went wrong? Did the Grinch come at night and steal all of it? I don’t think so.
When you suddenly have so much on hand, you are more inclined to spend it. After all, your wish has come true and now you can buy anything you want. You can buy a new car. Oh yes, pick the most expensive one, it’s only $250,000 you have to shell out. Well, guess what, that kind of thinking will hurt you in the long run.
Also, there’s the sudden urge to make more money. So you dive into a business, any business in hopes of generating more income. Do you understand the business? No? Well, you pay the consequences. “Because the winners have a large sum of money, they make the mistake of thinking they know what they’re doing. They are willing to plunk down large sums on investments they know nothing about or go in with a partner who may not know how to run a business,” says Bill Pomeroy, a certified financial planner in Baton Rouge, La.
And also, your addiction to gambling does not stop just because you win the lottery. Look at Evelyn Adams, she won the lottery twice. I guess once was not enough. You may be one of those people that will just keep gambling with your winnings, and that’s a dangerous financially behavior. It makes you wonder how the casinos survive, right? Let me tell you something, they’ll still be here hundreds of years from now. Why? Casinos captivate the strongest and weakest of human nature – GREED. Everyone goes to a casino to gamble — to win quick and big. If you lose, you’d want to play again to win. If you win, you’d want to play again to win. Believe me, you’re trapped.
So you see, with poor management you will soon realize your huge pot of money shrinks over time. After all, you’re in money shock. Your lump sum makes suddenly more powerful. And if you don’t control these powers well, you will be become a victim of your own greed. Aside from family issues, your big time purchases and carelessly planned investments will cost you your fortune.
So what should you do if you’re suddenly rich? First, you should sit down and establish a game plan. Learn before you invest! Just because you’re suddenly richer, doesn’t make you suddenly smarter. Do some research, see what options are available to you. Assess the risks and rewards of each investment. Know what you are doing, even if you hire someone to handle the money for you. So at least you will have an idea the financial advisor is working in your best interests.
Just because you’re rich does not excuse you from the basic knowledge of Money Management. Save a portion of your money in a safe high yield savings account. Contribute to your retirement accounts. Think before you buy. Is it really necessary to shell out $250,000 for a Bentley? Can a $75,000 Audi do the job? That’s a savings of $175K. Put the 175 grand to work and you can probably buy another Audi after 12-months. That’s making your money grow.
It’s true, no matter what your financial status is, it is very important to develop good financial habits. Keep a note to yourself, and start early. Learn how to manage money even if it is a small amount, because you’ll never know what opportunities may arise. Good habits make successful people.