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Five Top Reasons Why Rich People Go Bankrupt

Five Top Reasons Why Rich People Go Bankrupt

Surprising topic, isn’t it? Well, not really, especially if you keep a track of how many people (we are talking about the millionaires here) go broke each and every year, despite either having a lot of money and estate or boasting of a steady flow of income.

We see a lot of athletes, lottery players, gamblers, and so on, ending up bankrupt despite managing to get into the so called ‘millionaire club’. The thing is that they don’t manage to stay there for long, and rather make their way straight to the bottom of the financial world, from super financial success to going broke, or in other words, extreme financial failure.

The below given are some of the top reasons for such financial disasters:

Poor money management

It’s really surprising to see people hardly giving much importance to the way they handle their money, estate, and income. It seems that nowadays most of the people simply care about making more money. They think that more money means more happiness, or more financial stability.

However, regardless of how surprising or weird it might sound to you, my opinion is that more money is just as big a problem as no money, if not bigger, especially if you don’t know how to manage it. You might just end up spending all your money on luxurious things, accumulating some massive liabilities on the way, which will eventually make you pay when your short-term cashflow or the huge chunk of one-time cash you managed to make starts disappearing suddenly.

The emotional outburst

More often than not, people who end up being rich in a surprisingly short span of time experience an emotional outburst. During this period, they feel like they are at the top of the world, and can do anything they want, including buying and owning all the things which most of the multi-millionaires and billionaires do.

They might even want to show off to the society, friends, family, and so on, about how financially successful they are. Once they get infected by this rather ill mindset, they are bound to suffer a financial disaster, usually a bitter bankruptcy.

Saying that much needed word – NO!

If you can’t say NO to yourself, you’re bound to get into a ton of financial problems. People have a habit of wanting things they can’t afford or don’t even need. Most of the times, such decisions are inspired by people in their network who have got themselves such expensive things, or a desire to look special, unique, or show off. Sometimes it can also be their genuine desire to buy something, but one should still avoid doing it if the time is not right.

Remember, when you end up in a poor financial state and would be forced to seek help from your friends and family, you may feel embarrassed and guilty for all your mistakes, for spending money without careful planning about the future.

A new (poor) investor is born!

This is a really funny one. When people become rich without having proper financial education or training, they feel like they have become an intelligent investor, just because they now have a lot of money. This mindset becomes the starting point of a journey that would probably be filled with nothing but horrible and extremely faulty investment decisions.

Regardless of how much money one has and what they invest in, be it stocks, real estate, businesses, and so on, they are risking their financial future if they don’t possess the necessary financial skills and education for indentifying genuinely smart and profitable investments.

Being overly fearful

Sometimes, when people from a poor financial background manage to get rich in a short period of time, they start feeling scared of losing the money they made and ending up poor again. This too may turn out to be the reason rich people coming from a poor financial background ending up poor again. Because as a lot of psychologists believe, ‘you get what you fear’, and this ends up being true in many cases.