We’re all familiar with the daydream. The one where you hit the jackpot with this week’s lotto numbers and all your financial worries disappear. No need for a budget advisor – because the budget just got supersized!
But when the daydream is over, here’s the reality. More money, even a significant windfall, is not the answer to your financial woes.
That’s because getting a big one-off cash injection doesn’t teach you how to manage money, it doesn’t teach your about financial planning and it doesn’t teach you how to make money. Instead, it can give you the belief that you have a bottomless well of cash. If you spend like it will never run out, you will end up like the nearly 70% of lottery winners who end up broke after 7 years. There’s a reason they say easy come, easy go!
The same applies to inheritances (more likely than a lotto windfall for most of us). The evidence shows those who inherit a fortune, usually spend a fortune. A study by a US consultancy found 70% of wealthy families lose their wealth by the second generation. By the third generation, it’s a whopping 90%.
Similarly, many people believe all that’s required to get ahead is a bigger pay cheque, but that’s not a cure-all for your cash flow problems either. What we tend to do when we earn more is take it as permission to monitor our money less.
In what is surely the best example of ‘more’ not solving your money woes, heavyweight champion Mike Tyson declared bankruptcy back in 2003, despite having earned,and evidently squandered, US$400 million over his career.
Even if you’re a millionaire, if you spend like a billionaire, you’ll end up broke.
We’ve got many clients who earn six figure salaries, but when they first came to see us, they were racking up credit card debt and sliding backwards. Putting in place good structures, working to a plan, understanding their money psychology and being challenged and held to account helped them translate ‘more money’ into actual progress.
If you want to do the same, click here to book your initial consultation.