How Do Rich People Go Broke?

Most of us think of how to be successful but a fairly decent number of rich people lose their wealth after certain decisions or events. The top 10 reasons for this to happen include:

(i)     Divorce - Divorce rates in many countries are now over 50%. And “messy” divorces crumble many mighty entrepreneurs.

(ii)  Gambling – Sometimes addictive gambling ends wealth of rich athletes or entrepreneurs. In others, it is addiction of another nature – like wine, women or drugs.

(iii)      Legal suits – Lawsuits have destroyed companies and it is best to settle them before the courts decide!

(iv)    Illness – Sometimes sickness and treatment can dry up a fortune. Blood disorders and cancer are the most expensive to treat right now.

(v)     Government intervention – A sudden legislative change could put an entire industry out of business. Sometimes it is funny when some new politicians promise to bring back old jobs like coal mining or steel when it is no great advantage to produce in the “old” country.

(vi)     Tragic death – when a key entrepreneur dies with no clear identified successor, a full “war” amongst family members may break out and destroy the business.

(vii)  Financial crisis – Crisis like in 1997 or 2007 has destroyed billionaires and millionaires. One day you are worth RM100 million, the next day it is RM20 million in debt. Over 80% of those who went broke in a crisis never recover.

(viii)  Fraud/Scam – Everyone is prone to a scam. Richard Branson says people are constantly trying to scam money out of him. A Nigerian scammer Emmanuel Nwude once sold a fake airport to a major international bank for USD242 million. The scam was not discovered until 3 years later.

(ix)     Natural disasters – Hurricanes, floods, fire etc. can crumble some businesses. In the U.S., Hurricane Harvey cost USD125 billion. While Hurricane Katrina cost USD161 billion. Worldwide cost could run into a trillion dollars.

(x)     Spend, spend, spend! – If you are spending more than you earn, you will go broke. It sounds so simple! In the U.S., 70% of National Football League (NFL) players are either bankrupt or are under financial stress within two years of retirement. Why? Wasteful spending and lack of financial literacy. In some other cases, it is because they use funds from the business to do other private enterprises that fail! Or, there are dishonest 3^rd or 4^th generation children who don’t value the business (of their grandfather) and wastefully spend resources to the detriment of the company.

There you have it, the top 10 reasons why people go broke! I am reminded of Solomon in Ecclesiastes, everything is “vanity and a chasing after the wind”! The conclusion of the whole matter is to fear God and keep His commandments.

Reference:

15 ways rich people go broke, Emil Anton (www.alux.com)