Here’s a great article in the New York Times about people who got rich and then managed to lose it all. It includes parts of an interview with George Foreman, who came very close to losing it all, but managed to rescue himself from the brink of financial disaster. He says:
“A lot of people just don’t grow up,” he says. “I mean, 65-year-old men. They just don’t grow up. They don’t understand that money does not grow on a tree and that you’ve got to respect every dollar. Like Rip Van Winkle — the guy who slept — they party, party, party, then they wake up. ‘Oh my God!’ And they do something desperate trying to recapture what they had. And it doesn’t work like that. You must stay awake.”
What does this have to do with the readers of this blog, few of whom are ever going to make millions of dollars in their jobs? The same rules apply to the rest of us: if we don’t treat money with respect, if we approach the stock market, or life in general, like a gigantic virtual slot machine, we’ll lose everything we have. Money does not have the power to rescue us from ourselves.
It is possible to make money in the stock market at random, by the luck of the draw. The problem with this is we’re not good at acknowledging that it was just dumb luck. When we think back on our luck, we’re much more likely to think that hunch we had was our brilliant intuition or a message from a higher power.
If there is a higher power out there giving stock tips, She has a mean sense of humor, because I don’t know of any religous figures who are making out in the market.
So we get lucky in the market, and it goes to our heads. We look at the $10,000 we managed to turn into $20,000 with a couple lucky picks, and we start thinking that if can just have a couple repeat performances, we’ll be able to pay off our mortgage. So we follow a few more hunches, and pretty soon we’ve got $5,000. Easy come, easier go.
As the stories in the article suggest, it may be even easier to lose money by simply spending it than it is to lose it in the market… and at least you had some fun along the way. Either way, you end up broke, and, worse, you lose you confidence in yourself.
What’s my point? If you have dreams of ever being rich, now is the best time to get ready, and learn self discipline. Michael Jackson is a prime example of the fact that there is no amount of money an overgrown child can’t spend his way through.
Learn self-discipline and respect for your money now, before there are millions riding on the line, and you’ll be able to keep those millions when you get there. Self discipline is also a great help in getting there.
Don’t know where to start? Try Suse Orman’s The Laws of Money. In my mind, each of her five laws boils down to acting like an adult around money; respecting it, but not letting the idea of money have power over who you really are. And she’s a lot better at persuading people than I am.
Yes, I keep recommending the same books. If that bothers you, you can do one of three things: 1) Stop reading my blog, 2) Complain, or 3) Read them.