MSN recently published an article titled “Athletes Gone Broke”. I can tell you that it reads as a cautionary tale of what not to do when we have money in order to make sure that we don’t lose all of our accumulated wealth.
It is important for us to learn how to accumulate wealth, but it is also important for us to learn how to preserve our wealth. We can learn what to do from other people’s victories, but we can also learn what not to do from other people’s mistakes.
What is your biggest financial mistake?
Being wealthy can be a great asset. We have to always remember that we can lose our wealth just as quickly as we made it. I made my share of financial mistakes when I was younger. I regret accumulating debt because I thought that having credit cards made me more mature. I also regret buying a $30,000 Honda Civic on an impulse purchase during my lunch hour.
I now live on a very strict cash budget, and I only use my credit cards to maintain a good credit score. I use my credit card to pay for purchases such as trips and travel accommodations where a credit card is the only payment option. Financial responsibility makes us mature, having platinum visa card does not. It is ok to make mistakes as long as we learn from them, and we don’t make the same mistakes again. We should share our stories, and learn from the financial mistakes of others.
Tips to Help You Preserve Your Wealth
Don’t Take Money for Granted. We shouldn’t assume that our money will always be there. Antoine Walker was a professional athlete in the NBA, who accumulated over $110 million dollars from his NBA career. Only two years after his NBA career ended, Antoine Walker had spent over $100 million dollars on bad habits which included gambling in Las Vegas. It is ok to spend $50 million dollars a year if we are making more than that per year. However, we can’t always assume that money will be constantly flowing into our wallets.
Mange Our Money Wisely. Some say that the number one rule of being wealthy is to spend less than we earn, and we must always live within our means. Spending money we don’t have leads directly to bankruptcy. This was exactly the case for Mike Tyson. If the story of Mike Tyson losing $400 million dollars and filing for bankruptcy is not a cautionary tale of poor money management, then I don’t know what is. We have to trust our financial managers to effectively manage our money, our wealth, and our budgets. We also have to trust them to tell us when we are making mistakes. Set a budget and stick to it. We should also always give ourselves a financial buffer to make sure that we have an emergency fund in case something unexpected pops up.
Be Cautious of the Good Life. Young people who come into a lot of money have the tendency to let their finances get out of control. I know I did. The first year that I made a 6 figure salary I went on 3 vacations, refurnished my apartment with luxury electronics and furniture, and soon after bought an overpriced car just because I could afford it. Major League Baseball Star Lenny Dykstra loved spending his money on expensive cars and expensive real estate. This unhealthy spending habit eventually created $50,000 of assets and $50 million dollars of liabilities.
“While millions sound like they’ll last a lifetime, purchase like that will wipe them all away in a hurry.” To view the full article please click here.
(Photo by Ndrwfgg)
Kristina Tahnyak
Tahnya is a Certified Financial Planner and former Investment Advisor turned marketing and communications professional She holds a degree from Concordia University, is debt free and currently works in the field of digital marketing.
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