Being rich and making each one of your desires happen is one of the greatest situations you might find yourself in. But one downside to that is the possibility of going broke.
Here some things you shouldn't do to avoid that.
1 - Divorce
Divorce rates in the developed world are over 50%.
That means one in 1 couple is likely to separate. We know.. We know…
when you’re just starting the marriage everything is all rainbows and
sunshine, but people can grow in different directions.
You need to consider that there’s a financial aspect to this marital
partnership you call a marriage. The moment you marry someone your
finances get bundled together. You’re taking over their debt and they’re
also entitled to half of everything you’ve worked your butt off to
build.
That is unless you have a prenuptial agreement or more commonly called a PRENUP.
Divorce laws are basically theft from the rich and need to be
adjusted soon. We want to make a dedicated video on this sometime in the
future, because it’s such an important topic and most people don’t talk
about it that much.
There are numerous examples out there, but just to drive our point
across and understand the type of impact a divorce can have on someone.
Recently Jeff Bezos, the founder of amazon decided to separate from his
wife. He’s sacrificed almost all his life, taken on tremendous amounts
of stress to build what is today the largest store in the world. All
this work brought him a fortune of 140 billion dollars. Because he
doesn’t have a prenup, she’s entitled to half of everything he own.
That’s a 70 billion dollar affair. That’s more money than Sergey Brin,
the founder of google has and 3 times more money than Elon Musk. Once
the divorce is finalized his former wife will become the 5th richest one in the world.
You might say he can afford it, considering he’s worth so much, but
think of yourself, let’s say in 10 years you build a great company and
you’re worth 20 million dollars. Your partner will take 10 off the bat,
your lawyer will take a bite, you’ll still have to pay child support of
until both of your kids are 18 and the public trust in you falls
completely. A messy divorce can crumble even the mightiest of
entrepreneurs.
2 - Law Suites
When you’re rich, people sue the hell out of you, for almost anything.
You’ll be paying money left and right for the dumbest of things.
But that’s where the danger lies. A class action lawsuit filed
against your company for any form of wrongdoing can result in
catastrophic financial loss.
Not only you if you lose you will have to pay large settlements, but
you’re company probably has debt and if you’re a public company the
stock market will react.
You can go from being worth millions to filing for bankruptcy in less than a year.
3 - Illness
Being sick in the West is incredibly expensive, especially if you don’t have really great health insurance.
The costs of treatment for some diseases can dry up almost anybody
and it’s understandable, you’d spend any amount of a chance to live, but
that’s not always the case.
Let me put things into perspective for you so you can understand just how expensive getting sick can be:
Last year, total medical costs for an individual with a blood disorder came to $5 million dollars.
In 2016, for example, total treatment costs for a patient with a severe
swelling disorder were $6.7 million. And the list can go on.
Blood disorders & Cancer are the most expensive to treat right now.
4 - Government intervention
Governments can be tricky to deal with. A single legislative change
could put your entire industry out of business. It’s always funny when
new politicians promise they’ll bring back old jobs like coal mining,
because it’s clear that not where the puck is going.
Not to mention that in other more corrupt countries, the government
can literally take over your business and force you out of it. Just have
a look at what happened to Pavel Durov in Russia.
If you want to have money in the future you might want to look what’s ahead of you instead of behind you.
5 - Death
This one’s pretty self explanatory don’t you think?! The moment you die, your money is no longer yours.
Accidental deaths can happen to anyone. A private Jet has an engine
failure, a luxury yacht gets caught in dangerous weather, or some drunk
crushes you while you’re driving your family to the Hamptons for the
summer.
Death is tragic and even you need to be prepared for it. There are
numerous examples in history where one death was the first domino in a
chain reaction that lead to dynasties going bankrupt.
The best thing you can do is to be ready for this moment. Have your
affairs in order, make sure there’s a strategy in place for your money
and always above everything else, invest in your children. The more
educated your children are about money, the better of a shot of make it
last they have.
A while back we made a really valuable video called: 15 Lessons Rich
Parents teach their children which you can check out below. It’s one of
the most valuable videos on our channel!
6 - Financial Crisis
Those were the days… We remember like it was yesterday, checking the
news and seeing new high scores in terms of real estate. People were
buying land and buildings left and right with the hopes to flip it to
someone else you wanted in on the action. 2007 was a weird year, can we
agree on that?
Then it happened.
People who were worth billions, were now barely millionaires while those who were millionaires were struggling to find a job.
Real-estate developers were crushed. One day you’re worth 90 million
and the next day you’re 20 million in debt and the bank wants its money
today, because the bank is struggling as well.
Financial crisis are market corrections. It’s there to separate the
real from the pretenders. Most quick rich guys go broke at this point.
Over 80% of those who went broke during the financial crisis never
recover.
That said, there’s a small portion of the rich population who’s just
waiting for these pretenders to get burned. It’s by understanding how
the market works that you don’t fall prey to these situations. Financial
crisis are one of the best moments to invest. While everybody else is
retiring and licking their wounds, the real sharks come out to eat.
That’s when you start buying aggressively. While the pretenders were
purchasing property at a premium in 2006, the true rich were getting a
60-70% discount on the same property in 2008.
If you want to learn how to leverage these type of events in your
favor, we can’t think of a better book to cover the basics than
UNSHAKABLE by Tony Robbins. It’s the perfect guide to understand how the
richest of the rich make money no matter what the markets are doing. We
believe the book is so valuable that we’re going to give it away for
free as an audiobook. Just go to alux.com/freebook and sign up. The great folks at audible made this deal possible for our community.
7 - Getting Scammed
Believe it or not, but no matter how smart you think you are, you are still prone to being scammed.
Richard Branson says people are constantly trying to scam money out
of him and 2 years ago someone actually got 2 million dollars from one
of Richard’s friends. The conman pretended to be Richard and asked his
friend for a quick 2 million dollar loan, in the aftermath of hurricane
Irma which hit his island. What’s 2 million between friends right? The
money was immediately gone.
You might not realize this, but people will go to great extends to get their hands on your hard earned capital.
We could sit down and talk about scams all day. One of our favorites is
Nigerian scammer Emmanuel Nwude once sold a fake airport to a major
international bank for $242 million, and the scam wasn’t discovered
until 3 years later.
History is filled with stories like this one.
8 - Crypto
Uhhh.. can you feel the tension in the room. Only the word crypto can bring some people to tears.
We remember the climb in 2017. Casually chatting between friends
about how volatile this phenomenon was and how amateur investors are
gonna get burned. We remember reading titles about middle class
americans taking a second mortgage on their house to buy Bitcoin at
15,000 dollars per coin.
That’s the moment when we realized that this bubble is gonna burst soon and took a step back.
Imagine taking your life’s work and gambling it on something you
don’t fully understand in the hopes that you’ll get rich overnight,
exposing yourself to unrecoverable debt..
Rule of thumb:
If your uneducated cousin is “investing” in this new thing then it’s already too late.
We’re still intrigued and excited by the potential of blockchain and
decentralization, but to be honest it’s unlikely that your coins will
ever be worth 20k again.
9 - Failed Businesses
How many times have you heard of people winning large amount of money or
coming into inheritances and just a few years later their back to being
broke.
What most people don’t understand it that you’ve got a limited
numbers of failures you can accommodate, after which you’re back to
where you started.
Just because you now have money it doesn’t mean that it’s easy to maintain, especially if you’re not financially educated.
Money draws the leeches out!
Although investing in your childhood friend’s sock-sharing business
startup might sound like a good idea, it isn’t. The game of Business is
really hard and if you were bad with money before you had it, it won’t
be long until you don’t.
10 - Retirement
Here’s a controversial topic for the upper-middle class of america. Hear
us out. Let’s say you’re worth 1 Million dollars. You’re a millionaire!
You’re living the dream! You have the big milly saved up for
retirement.
Let’s say you retire with a cool 1 million at the age of 65.
Depending on where you live, that money might run out before you do.
Here are the 5 states where your dollar will last the shortest:
1. Hawaii: 11 years, 8 months, 20 days
2. California: 15 years, 5 months, 27 days
3. New York: 16 years, 3 months, 22 days
4. Alaska: 16 years, 8 months, 6 days
5. Maryland: 16 years, 8 months, 29 days
And here are the 5 states states where your dollar will last the longest:
1. Mississippi: 25 years, 11 months, 30 days
2. Oklahoma: 24 years, 8 months, 24 days
3. Michigan: 24 years, 7 months, 14 days
4. Arkansas: 24 years, 7 months, 4 days
5. Alabama: 24 years, 7 months, 4 days
The downside is, you’d have to live in Mississippi.
In our 15 Things To Do If You Get Rich All of a Sudden video, we
introduced you to the 5% rule, a method that can help your money last
and grow through your retirement.
11 - Natural Disasters
Hurricanes, fires, floods… these can crumble everything you’ve worked so
hard to build. The amount of monetary value lost in the aftermath of
these type of events is outrageous.
It is estimated that Hurricane Harvey had total costs of $125
billion—second only to Hurricane Katrina in the period of record, which
had an approximate cost of $161 billion.
The cumulative cost of the 16 separate billion-dollar weather events
in the U.S. in 2017 was $306.2 billion and that’s US alone, if you start
looking at the damage done world wide, the number is over a trillion.
So much wealth can be wiped out in just a short time span.
12 - Too many kids
People don’t realize just how expensive raising children can be, especially in the developed world.
You might wanna sit down for this.
Raising a single child born in 2015 until he’s gonna reach the age of
18 years old will cost the middle-class parents 233,000 dollars in the
US. If you’re below middle class, it’s still gonna cost you around 170
thousand, while the rich spend north of 380 thousand according to a
report by the USDA.
Approximately 20% of that amount goes into food alone & these amounts don’t factor in student debt and going to university.
You never realize just how expensive having a child is, until you live in the developed world.
13 - Kidnappings
The fact that there’s an entire industry related to Kidnappings &
Ransom Insurance should ring a bell to how big this phenomenon is.
Employees get kidnapped, relatives get kidnapped and even pets.
People will do anything to get some of your money.
Somali piracy is a $1.7 billion a year problem.
Over 70% of kidnappings never go reported and a large portion of them
never get resolved, resulting in the death of the kidnapped person.
World-wide this is a multi-billion dollar business of snatching
people. Statistically speaking, taking 2014 as reference, 35 percent of
kidnaps were conducted in Asia, followed by Africa at 30 percent, the
Americas with 21 percent, Middle East with 12 percent and Europe/Russia
with 2 percent.
Nigeria was the No. 1 country for kidnap incidents that year.
The amount of money asked in exchange for someone’s freedom usually
exceeds what the family can pay. The average asking price for an
American is $20 million dollars and you’ll be shocked how many times the
ransom is negotiated down to 7 or 8 million and paid to the kidnappers.
Watch out for your pets as well. Last year, 60 dogs were stolen per
week in the UK, with the goal of asking money for the return or resell.
14 - Blackmail
Hand in hand with kidnappings is blackmail. Extortion is a very lucrative business and nobody is safe from it.
At the beginning of this piece we mentioned Jeff Bezos. Recently, he
went public that the national enquirer was trying to blackmail him. They
have obtained private conversations between him and his mistress and
were threatening to go public with the nudes.
We live in a culture that normalized sexting to a point where it can
be weaponized against you. People use their exes nudes for revenge and
more and more people fall victims of entrapment and then extortion.
Imagine you’re getting some action on the side and that person
betrays your trust and documents your performance threatening to send
the videos to your partner. A divorce would cost you millions and you
will probably lose your children as well. So you go along with the
payment, only to receive the same threats next month. Blackmail is sort
of a premium subscription service to not completely f*ck up your life.
These days, people rely on your internet connection to do so, that’s
why internet privacy is such a big deal. They are mining as much of your
data as possible for either identity theft or blackmail if they get
something good. That’s why we recommend VPNs. They hide your online activity and are super easy to use. We reached out to the company we use, NordVPN and secured the best deal on the market for our community. If you go to alux.com/vpn you can get 3 years of VPN
services for the price of one. If you’re an aluxer and just want to try
it, you can get 30 days trial to make up your mind free of charge.
Don’t make it easy on these guys.
15 - Spend it all
Lastly on our list of how rich people go broke is by spending more than they earn. Hard to believe isn’t it?
You can see this around professional athletes. They get a big contract, blow it all away and then end up with nothing.
The numbers show that 78% of National Football League (NFL) players
are either bankrupt or are under financial stress within two years of
retirement. These folks go from earning 7 figures a year to bankruptcy.
How does this happen? They’re wasteful in their spending. They
purchase liabilities instead of assets mostly. They also get ripped off
by people who are taking advantage of their position and their lack of
financial literacy.
One of our favorite examples is Shaquille O’Neal. It took him 48
hours to blow through his first 1 million dollar check before realizing
he’s already in debt. We’re big fans of Shaq, because he understood that
he needs to get educated if he wants to survive this cliche and so he
did. Now he’s one of the most prolific investors, he’s worth over 400
million dollars, most of it made after he retired from the NBA. Be like
Shaq!
We’re sure that in your life you know somebody who once had a lot of
money and then they went broke. How did it happen? We look forward to
reading your stories in the comments down below!
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