Ultimate Self (realizing personal potential)

Wealth hazards

Lack of money is a serious impediment to happiness, personal growth, relationships (the number one cause of arguments is money) and possibly even health and survival. Yet many people, even those with good incomes, have an attitude to money that ensures their financial insecurity.

Most of us wish we had more money and yet many people squander hundreds of thousands of dollars without a thought. Many dream of easy ways of getting money (a lotto win, an inheritance, or a get-rich-quick scheme) while not bothering to hang on to, let alone make the most of, what they have. During our working lives we can earn a small fortune and if we manage that money well we can ensure our financial security. But many bad habits or choices can leave us flat broke.

The major wealth hazards are:

Attitude. Are you a spender rather than a saver? Do you have clear financial goals or live just for today without a thought for your financial future? Do you think about how you use money at all or do you operate on automatic pilot? Do you have a ‘Magic Pudding’ view of money – that defying all logic, a given amount will ‘stretch’ to cover everything you want it to? Are you able to say ‘no’ to yourself and to postpone instant gratification? Do you work to a budget or buy on impulse?

The pleasure principle. The good times roll on and we’re encouraged to believe that we deserve the best; we deserve whatever we want, now! So we party hard, overindulge, and get into debt to buy luxury goods, a McMansion, a second or third car, boat, holiday house, a trip overseas. We don’t want to cook so we eat out, buy takeaways and convenience foods. Borrowing is now our first resort instead of saving for what we want. Personal debt is skyrocketing. Anything bought with credit though costs more and, with only a few exceptions, loses value massively as soon as we buy it. Unemployment, illness, accident, or economic down turn could mean we lose everything if our debt is too large.

Smoking. If a teenager began smoking today and maintained a pack a day habit, in a year he would spend around $AU4,700. If he smoked for 20 years it would cost him about $94,000 (in today’s dollars) and if he smoked for a lifetime (say till the age of 65 because smokers rarely life to a ripe old age) he would have spent about $220,000 - not including the inevitable medical costs for cigarette-induced illnesses. If he saved and invested the same amount of money each year the compound interest accrued would make him wealthy. So quit smoking.

Gambling. There is nothing wrong with a lotto ticket or a flutter on the horses but habitual gambling squanders thousands of dollars. Gamblers rarely tally up what they lose preferring to focus only on wins. So they rarely know how much their habit costs. Every system of gambling exists to make money for the operators and to extract money from the gamblers. In the long run, only the operators can be winners. Gambling can become addictive (the adrenaline high of the chance of winning ‘the big one’ can be hard to resist) and it distracts from other, more productive activities.

Compulsive shopping. Part of the pleasure principle but seemingly less extreme because the dedicated shopper only buys ‘small’ items, such as clothes, shoes, handbags, makeup, jewelery, etc. For many people shopping has become a pastime, a hobby and a passion. Studies suggest that up to 16% of the US adult population suffers from compulsive, uncontrolled buying. One young woman I know has spent $60,000 on her shoe collection but lives in a series of dingy share houses because she can’t ‘afford’ better.

Any addiction. People can become addicted to just about anything and most addictions are health and wealth hazards. Do you have some excessive habit that you can’t break and which you spend more money on than you should (such as alcohol, drugs, food, porn, some ‘hobby’ or the already mentioned gambling and smoking)?

A spendthrift partner (or other family member). No matter how financially savvy you are if your partner/child/sibling/parent etc is a spendthrift who you often financially ‘bail’ out of trouble, you are seriously handicapped. I’ve had clients with highly successful businesses bankrupted by a partner’s out-of-control spending.

Unwise investments. There are many seemingly respectable and profitable businesses that are in fact risky. When it comes to handing over your cash it pays to be vary. Research thoroughly, read all information and get advice from more than one source. As I write, the story of yet another property investment company failing and thousands of investors losing their life savings fills the media. Optimism is great but temper it with caution.

Scams and get rich quick schemes. There are countless crooks eager to fleece the unwary. The Nigerian email scams are now notorious but still people fall for them. One Australian family recently lost their home, business, and life savings to these fraudsters. The amazing thing is that many victims refuse to believe they have been ripped off and continue sending money. Is it gullibility, a trusting nature, greed, or the ‘it won’t happen to me’ syndrome? If things sound too good to be true they probably are. See www.scamwatch.gov.au for more information.

We need to take control of our money and use it to our best advantage. If money slips through your fingers ask yourself why. There is usually a hidden psychological reason. And when it comes to spending ask yourself: