Top 5 Ways To Go Broke

Ever wonder why some people go absolutely broke. Not like Donald Trump who had a negative net worth of a Billion Dollars but still lived lavishly. And maybe not in a totally homeless sort of way, with a shopping cart full of the clothes and tinned food. But so broke that it hurts and your ATM won’t print out your account balance because the paper costs more.

5. Racking up credit card debt.
Some people just spend their entire credit card limit buying crap they don’t need. As long as their paycheck covers the minimum balance on the credit cards, they think they can afford it. Worse, they think they deserve it because they work hard for a living. If you can’t pay cash (or atleast pay off your credit card statement every month) you can’t afford it. And if you can’t afford it, you don’t deserve it.

4. Not saving for a rainy daynot saving for a rainy day.
Going hand in hand with excessive credit card debt is having no savings. Many people live one paycheck at a time. A loss of a job or a medical emergency oftens pushes them over the edge. If you don’t have a cash cushion to fall back on, its going to be a pretty hard landing.

3. Getting greedy – Part 2
So many rational and otherwise sane people get taken in by the dumbest of scams. Take the Nigerian Email scam. Someone you don’t know, who lives half way around the globe and writes terrible english wants to send you millions. All you have to do is put up several thousand dollars.

Or consider the latest version of that. I got this one myself. Some foreign company contacted me regarding my resume on a job site. They wanted me to act as an intermediary for their clients in the US. The clients send me the money. I take a small cut and send them the rest. All they want is my bank account details and personal information. How bloody retarded do you think I am?

2. Getting greedy – Part 1
Many people found some scheme or investment that worked out well for them. So they over-leveraged into it at the hopes of striking it rich. Kind of like the people who borrowed against their homes in 1999 and put all the money in tech stocks. Or the so called ‘investors’ who bought a house in California, Nevada or Florida in 2000, watched it triple by 2005 and then refinanced it pulling cash out and bought 12 more. Only by then the market had turned and they went to the poorhouse.

1. Letting your ego get in the way
Isn’t it strange how most people who win the lottery are worse off after 5 years. Its because they think they geniuses now they’ve won the lottery and think they deserve all the trappings of success like million dollar homes and fancy cars. Unfortunately they’re still the same simple people who’re statiscally challenged and they end up spending too much.

Even famous stars like MC Hammer & Mike Tyson who made millions spent all their money on their entourages and ended up broke. Or the famous Hunt Brothers who thought they were brilliant and could corner the silver market. They were filthy rich when they started but went broke on this stupid exercise in ego. Kind of like how Brian Hunter lost $6 Billion for Amaranth.

Special thanks to Lazy Man’s post where I found out about this Top 5 contest at ProBlogger.

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