Business

Money Musings: You Can Never Be Too Rich to Fail

Your Money

With Cherryl Hanson-Simpson

Thursday, March 06, 2014    

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Recently, there was a news report that a ticket bought in California had won the sixth highest lottery jackpot in the United States, earning approximately US$425 million in the process. The Powerball winner would net just over half that figure if he or she opted to take home a lump sum.

It would be easy to think that this sudden windfall of money would make the recipient financially secure for life. However, there are myriad stories of other big lottery winners who squandered their riches in record time and had little to show for their good fortune after a few years.

Many people believe that if they could earn a large enough sum of money, whether through lady luck or in their regular job or business income, then they would never have to worry about money again. Once their cash inflow is significant, they think that they can live their dream lives forever.

The problem is that most people tend to boost their spending in line with their increased income level, and they have the propensity to always outspend whatever they earn. For these persons, more money just signifies more funds at their disposal to spend carelessly.

Money is no guarantee of success

Don't be tempted to think that receiving lots of money will solve your financial problems; in fact, if you get a sudden inflow of cash and you still practise poor money habits, you may actually intensify your problems. You cannot build a secure future with money alone; it's what you do with it that matters.

History is replete with examples of multi-millionaires who spent money lavishly and lost. Despite all the wealth that Michael Jackson created in his lifetime, he left a huge trail of debt behind when he died. Several sports figures are also famous for depleting their tremendous fortunes over time.

Therefore, whether you a get a significant increase in your income or you have been blessed to enter the realms of the mega-rich, you can still fail with money if you don't apply the basic principles of financial success and exercise wisdom in your financial decision-making at all times.

Money laws are non-negotiable

There are various laws of nature which dictate how our universe operates; for example, the law of gravity keeps us from flying off the Earth into space. Similarly, there are financial rules which control your results with money, whether you are wealthy, impoverished or anywhere in between.

One rule is that you cannot spend more money than you generate. Some people will get by for a time by using borrowed funds, but loans are not a true source of income as they have to be repaid. Eventually, the level of debt will outweigh their income and assets, and bankruptcy will result.

Another principle is that you need to consider the risks before you make any investment. If you decide to put your life savings into an investment option without assessing the viability of the plan or determining how you are going to be repaid, you are very likely going to suffer some losses.

Consequences for ignoring rules

Thanks to corruption and an inadequate security system here in Jamaica, sometimes it seems that persons are able to avoid punishment for their criminal acts. However, while man-made laws require external enforcement, it is almost impossible to escape the penalties for breaking the laws of money.

So, if you choose to spend everything you earn instead of putting aside some funds for the future, you will eventually pay for your omission if an emergency arises or when you're not able to pay your bills in your senior years. At some point in time, your actions or inactions will catch up with you.

It may not always be clear where the source of a money problem originated. Let's say a lady who was prudent with spending while single, marries a man who wastes money. After a few years, her finances are in disarray because she has been supporting her husband in his poor money choices.

Riches may delay the inevitable

While persons are not exempt from financial failure if they disobey the laws of money, if they have a large asset base they may be able to delay the negative results for a while. Although they may not see the effects right away, the downward spiral of money challenges will come to light in due time.

Sometimes, persons may pass on without experiencing the consequences of their poor financial choices. However, they leave behind problems that will be reaped by their dependents or beneficiaries. Without fail, someone will have to pay for the money mistakes that were made.

The good news is that you can reverse this negative course of events, once you identify where you have gone awry financially, and put strategies in place to adhere to the laws of money. It may take months or years to recover, but you will eventually be restored on the pathway to financial success.

Cherryl is a money coach, business mentor, and founder of Financially S.M.A.R.T. Services. Her upcoming book, "The 3 Ms of Money" will reveal all the secrets she learned about financial success. Get more advice on money and business matters at www.financiallysmartadvice.com and www.entrepreneursinjamaica.com. Email comments to cherryl@financiallysmartonline.com.

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