I recently had a conversation with some friends about the rich and famous that go broke. Former NBA superstar Latrell Sprewell recently lost a home to foreclosure. MC Hammer poked fun at his own debt in a “life comes at you fast” commercial. I looked around the Web and found several more names including Thomas Jefferson, Mark Twain, Dorothy Hamill and George Foreman that amassed and lost a fortune. (Not to mention the large number of lottery winners who end up in bankrupcty court. Read the MSN story here.) This older story looks into why the rich go broke. The article sites several reasons (and excuses) for the financial downfall of the wealthy. But one thing the article fails to mention is that you don’t have to be a millionaire to go into debt.
It’s easy to think that if you were a millionaire, you would finally have financial freedom. How could you waste that much money? And therein lies the problem. If you are spending more than you make now, then you are in the same position as the famous people mentioned above. A high income does not guarantee financial freedom.
The Simple Dollar addresses this notion in a post on net worth. The blogger points to a quote from The Bogleheads’ Guide to Investing by Taylor Larimore, Mel Lindauer, and Michael LeBoeuf, “It’s not how much you make, it’s how much you keep.”
To break through from living paycheck to paycheck and have the financial freedom everyone longs for, we must live within our means. We can’t get caught up in keeping up with the Jones’ (or maybe the Jordan’s in Sprewell’s case). Establish a budget and track your expenses. See the e-learning course on budgeting for help. Financial freedom is closer than you think.
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