However, as the number of millionaires increases, the number of people reaching bankruptcy and being broke is ultimately increasing too. News of the once rich and famous going broke often pops up in the Financial Report. How can you avoid the mistakes of the once rich who’ve gone broke? Here are some common-sense tips to help you avoid being broke.
1. Don’t purchase what you can’t afford just to impress.
These days, we are all looking to impress. Looking less is unacceptable in certain parts of the world. While some believe beauty is found within, others believe that beauty is in the Prada you wear and the sports car you drive. So, to impress those who really don’t matter, we spend our paychecks in a department store. Take this lesson from history: one should never spend beyond their means. If you can’t afford it, then find alternatives according to your means. This is a survival mechanism which allows you to save and prevents you from going into debt. Getting away from your need to impress is a great way to avoid excessive spending.
2. Freeze your credit cards in your freezer.
The trend these days, instead of carrying cash, is carrying different cards from different banks with different interests in your purse or wallet. You swipe at every single purchase with your mind on your purchase and ignore the bills you’ve been racking up. According to research, one of the biggest reasons for an individual to be broke is overspending on multiple credit cards. Running away and changing your identity is one option, while another is to declare bankruptcy. To avoid either of these, try going old school and carrying cash instead. This limits what you can spend in the moment. If the temptation of using your credit cards is too great, try freezing them in ice in your freezer. This adds another obstacle between you and your next charge.
3. Invest smartly, not impulsively.
Investing is a great way to make money and protect your assets. However, we aren’t all experts in investing. We may be great moneymakers, but the talent of wise investing doesn’t come to us all. Investing emotionally is the same as gambling — we gamble impulsively, hence we lose big or win big. As a precaution, always have an advisor who is trustworthy and an expert on investing either in real estate or stock markets. However, research on your part is also important. It will give you the confidence and knowledge you need to make smart investments. After some time, you will be used to investing and your experience will be your greatest advisor.
4. Focus on diversifying your assets.
In the dating world, we are often told to focus on differences rather than similarities. Why? Because it gives us the confidence to secure our emotional selves. Why not act the same way with your assets? In the 2000s, the “Get Rich Quick” scheme was on the rise. Many went broke when they invested all their assets in one scheme. History teaches us to never leave all our eggs in one basket. This is an important lesson when it comes to investing. Investigate how you can expand your assets and diversify your investments in different markets and different sectors. Read books to help you understand how you can best go about diversifying your assets. Thinking about finances is always uncomfortable and spending is always tempting. However, in today’s world, your assets and your bank balance will give you a sense of security, while extravagant spending may leave you at the bottom of the barrel. Featured photo credit: VIKTOR HANACEK via picjumbo.com
