The fundamental mistake newly-rich people often make is to think they have so much money they can’t blow it all.
Millionaires are known for having habits like carefully planning and spending their money wisely, constantly educating themselves, waking-up early, and especially for taking care of their health.
But, we have all seen the millionaires who don’t have those self-control habits. Those millionaires who connect-up with a spouse or partner who hasn’t had money before and doesn’t know that money has to be taken care of. The millionaire who just plain do the opposite of what it takes to make and keep money — and they have bad habits that ultimately leave them broke.
Here are four of those most common habits of millionaires who have gone broke:
1. They didn’t track their spending.
Whether you’re a freelance writer or Bill Gates, everyone needs a budget. When looking at your money, you should be tracking every penny you spend. Set a budget and know where every penny goes.
I personally recommend watching the little costs that we normally don’t pay attention to. The $10/month accounts add up over time. The more of them you have, the more money will be going out of your account each month.
While this is a habit that most millionaires follow, millionaires in the process of going broke are not watching and following their money — they do the opposite. They cannot even tell you where it went. These soon-not-to-be millionaires don’t even go-over their bank statements or monthly bills to make sure that there aren’t any unauthorized transactions. They also don’t look at bills from restaurants, hotels or retail purchases, much less the grocery store, to make sure that they weren’t overcharged. They also don’t compare prices for items they routinely purchase, such as their cell phone bill.
In the end, these millionaires waste a lot of money simply because they don’t track their spending. It may not seem like much of a problem in the beginning, but it can quickly add-up. In the end — well — no money is a problem.
2. They made pricey and emotional purchases.
Millionaires who are going broke have a nasty habit of making emotional purchases. For example, when they’ve had a bad day at work they may go on a Amazon spending spree, or they may determine a couple of times a week that they have to have DoorDash because they are depressed about something and don’t want to cook.
Most millionaires are frugal and known to be careful with their spending. They avoid making emotional purchases because millionaire emotional purchases tend to be a bit more spendy than Amazon. These are often the expensive “sink the boat” type purchases.
One interesting thing about the millionaires who stay rich is that many use coupons, look for the best bargains, and cause a scene if they’re overcharged. Then, they’ll turnaround and go on a luxurious European vacation or purchase an item like a massive diamond ring. One of my best friends is a multi-billionaire. Last week I was over at his house and heard him on the phone arguing with a company over a $40 charge. Be frugal no matter what stage of life you’re living.
3. They didn’t have multiple streams of income.
Author Thomas C. Corley’s five-year study of self-made millionaires discovered that a majority of them have multiple streams of income. In fact, 65 percent of the millionaires he studied had three streams of income, while 35 percent had four streams.
However, not all millionaires follow this multiple stream rule. Take the case of Eike Batista, a Brazilian businessman who was worth an estimated $35 billion. Batista truly believed that nothing could hurt or even slow down his oil and gas business, OGX. This company was his crown jewel. But when oil production slowed he was forced into bankruptcy.
“Having multiple income streams makes a lot of sense,” says Corley. “When one stream is negatively affected by systematic economic downturns, of which you have no control, the other streams can come to the rescue and help you survive the downturn, without seeing your lifestyle dramatically affected.” This also means that you follow the rule of, “not putting all of your eggs in one basket.”
4. They were Impatient, aggressive investors.
Unlike long-term investors who are patient and remain calm, aggressive investors use “The Wolf of Wall Street” as their playbook. They pick stocks on a hunch and then unload their investments panically when things start heading south. Even worse, because they were successful making millions, they believe that don’t need the advice of educated investors and rely on their own street smarts or delusions of grander.
The bottom line is, educate yourself about your money. Protect your money, watch your money, take care of your money so that you, too, won’t be a broke millionaire.
Credit: John Rampton