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This Is How You Will (Likely) Lose All Your Money If You Get Rich

by | Oct 2, 2023 | Money, Personal Finance

This is one of the most important things I’ve ever written.

Making lots of money isn’t the hard goal people think it is. Once you do it you realize it isn’t that complex. The challenging part is keeping the money.

How do I know? I may a boatload of cashola multiple times in my life and lost the lot. I went from “new money” right back to “dumb money.”

It was devastating. I lost life partners, family members, and even my soul at one point. Here’s how you will (likely) lose all your money if you get rich.

The crypto Lambo bro with a huge ego that lost everything

Most of you probably hate crypto. That’s okay.

I follow the industry as a side passion. Recently I saw a few big-name crypto influencers get wrecked. They lost everything.

One of them is a popular Youtuber. He made stacks of cash and bought a Lambo. He ran a business with lots of employees. One day he woke up and found he’d been fired from his own company.

He was devastated.

At the same time it got revealed he cheated on his wife, did drugs, and took money from the public in a series of pump and dump investment disasters. The guy had one of the biggest followings online.

A few days ago he went to the house of a person he believed had his repossessed Lambo. He live-streamed the whole thing.

Allegedly there was a gun in his bag.

He raged on camera for 30 minutes. It was hard to watch. He’s lost the plot and become unrecognizable. The police showed up mid-Youtube-stream. They arrested him on camera. The next day the story was all over the internet.

Here are the issues:

  • He got rich quick
  • He let his ego get out of control
  • He trusted other people with his company (who took it from him)

Money has ups and downs

When rich people get rich they think the opportunity that made them the cash will always stay the same. Wrong.

2021 was one of the best years of my life. I made more money than I could spend. But past experience has shown me that it won’t last forever.

So I put money aside. I assumed high-risk assets like crypto would drop in price. I assumed online business might get harder.

Then the global economy crashed.

No one can predict these events, despite gurus saying they can. But you can guarantee with a wild bull market like 2021, that got out of control, there’s gonna be a huge drop.

Most lost everything. I didn’t because I expected hard times, thanks to the blessing of the dot com bubble and the 2008 global financial crisis.

The best ways to make money are often full of flaws

There are a lot of business models and income streams that are flawed.

In the early days of Uber a family member of mine drove a black Mercedes Benz under their Black service. He made $150,000 a year doing it. He was living like a rockstar compared to his former life.

Then Uber changed the game and the pay went down. The bastards cannibalized the service. His income dropped to $40,000. He could no longer afford the payments on the Mercedes and was forced to quit.

What did he miss?

He had zero control. He built his empire on someone else’s land who didn’t give a f*ck about him or his two kids. So he got wrecked and learned a valuable lesson.

This lesson doesn’t only apply to Uber drivers. Many ways to make money are fundamentally flawed. They may work in the short term, but long term they’re a nightmare waiting to happen and stab you in the face.

It’s easy to see stacks of cash coming in and think it won’t change. That’s why the only way to get rich and stay rich is to do the research and overcompensate for the flaws of any income stream.

The question I ask myself daily is “how do I own more of what I do?”

I can’t own everything. Like, I can’t own WordPress which runs my personal website. But I can understand the risks and mitigate them.

The biggest problem with getting rich is we delude ourselves. We lie to ourselves about how we’re making our money.

Be honest. Most money-making schemes are temporary. That’s why it pays to have multiple income streams and to be always building something on the side that can make money in case the worst happens.

How to make big money and keep it

You don’t have to make $20M to be rich.

For some of you it might be $100K. That’s fine. The point is once you hit your big number you want to lock in some (or all) of the win.

The simple way is to invest the cash in something that has safe, reliable passive income — typically, treasury bonds, real estate, or dividend stocks.

That stream of income you do zero work for gives you peace of mind. It lets you build the next thing and have your food, shelter, and energy bills paid. In that relaxed state of mind you can reset your ego and take a break.

There will always be more opportunities and more ways to make cash.

But if you lose all the money you make it 10x harder to make it back, because you become desperate and will try to get rich again faster than the last time. And this seals the fate of your downfall.

What I’ve found is once you have your big financial win, if you lock it in and get passive income from it, then you set yourself up to have a 3x bigger win the next time.

This formula is powerful. Once you master it, it helps you climb bigger and bigger Mt Everests.

Pretend a hacker can steal it all

I lost over a million dollars of my net worth.

My digital wallet got hacked. The fastest way you’ll lose all your money is to have it in one place. I was chatting to one of my clients the other day. She had all her money with one American bank for the last 20 years.

16 days ago they froze all her accounts.

She was accused of doing dodgy stuff. Turns out it was a scam and now she has to wait a month to get access to her money again.

Here’s the problem: in the meantime she has bills today. Having her bank account frozen may bankrupt her in the short term.

The lesson here is to diversify.

  • Have your stocks held by multiple brokers
  • Have multiple personal bank accounts
  • Have multiple business bank accounts (if you own a business)
  • Have some cash in a safety deposit box for emergencies
  • Maybe store some cash by buying artwork or gold

Just don’t have every cent you have in one place or you may lose temporary access to it, or worse, have it all stolen.

The last lesson on this one is diversification. Yes, you may love Bitcoin and have every spare penny invested in it. But this is stupid and you’re asking for trouble. No one asset is safe or a sure thing.

The only guarantee in life is that black swan events can happen and you can protect yourself from them through diversification.

Invest in multiple asset classes to get rich and stay rich.

Big purchases stop you from taking risks

Wealth = Calculated Risks + Time

In the example above, if you made $100K and went out and bought a BMW, you’d feel awesome for a few weeks. And this is what most people do. The problem is you’re now a slave to the luxury purchases you’ve made.

You have to maintain these luxury items. They occupy space in your head. And you’re less flexible to make moves that don’t produce any money right away.

It’s why I drive an 8 year old Honda Civic.

In 2021, at the top of the boom, I could’ve gone out and bought some fancy Porsche. But I didn’t. Peace of mind is more valuable. It gives you the right frame of mind to build many tiny empires at the same time.

Fight Club movie creator Chuck Palahniuk once said:

“The things you own end up owning you. It’s only after you lose everything that you’re free to do anything.” I think about that every day.

This article is for informational purposes only, it should not be considered financial, tax or legal advice. Consult a financial professional before making any major financial decisions.

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