Trying To Strike it Rich? You May Want To Think Twice

strike it richEven before 1849 when Americans packed up and headed to California in hopes of finding gold, people have always had a fascination with trying to strike it rich or get rich quick. When the Powerball lottery was at its peak a few weeks ago, it seemed like every news channel and newspaper was reporting on people standing in line, hoping to strike it rich. This got me to thinking about the term, its meaning and actually becoming wealthy.

Strike it Rich!

When you think about the term strike it rich, it is basically saying that you get rich instantaneously. You find a mountain of gold…you just struck it rich! You win the lottery….you struck it rich! There is only one problem when you strike it rich: nothing else has changed. So what makes you think that things will be different now? In most cases, they won’t be.

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There was an interesting study conducted on past lottery winners. The study found that close to 50% of lottery winners spend all of their winnings within five years. You read that right, five years. Why is this? Because they still don’t know how to manage money.

Most are familiar with the term “insanity is defined as doing the same thing but expecting a different result.” This applies here. Most lottery winners go broke because they were never good with money in the first place. Just because they win $100 million doesn’t mean that all of their problems are solved and they will live happily ever after.

There was a recent lottery winner in my area that won a good sized jackpot. The exact figure is eluding me right now, but when the news was interviewing him after coming forward as the lottery winner, he said he was paying the rent that month for everyone that lived with him in his high rise apartment complex. I’m not saying he shouldn’t do this, but chances are he is going to end up part of the statistic mentioned earlier.

Other Ways to Strike it Rich

While I focused mainly on lottery winners above, the same logic can be applied to any way you can think when you strike it rich. A great example would be an inheritance. In many ways, getting an inheritance or a windfall is a lot like winning the lottery. You come upon a large sum of money quickly, you strike it rich. You think about all of the things you are going to do with the money. Next thing you know, you’re right back in the same spot you were before.

Same goes for your tax refund. Granted it was your money in the first place, but for many, that money is spent before they get the refund check. Look at all of the tax service companies offering to give people their refund before the government cuts the check as an example. Again, nothing changed. There aren’t statistics on the odds of spending all of your inheritance or your tax refund, but I would venture that they are similar to the lottery winner odds above.

Of course, you could also strike it rich through a get rich quick scheme, though the odds are more likely that you will lose it all. But not because you received a large sum of money and spent it all, but rather because you paid money to try to double or triple it overnight and it was too good to be true.

Charles Ponzi was the first mainstream person to use a get rich quick scheme, and it is because of him that most schemes now are called “Ponzi Schemes”. His scheme was straightforward – he offered investors a 50% return on their money in a short amount of time. He did this by paying current clients with new client money. It’s the foundation of what Bernie Madoff used as well. (I guess some things never do change!)

How To Strike It Rich And Make It Last

So the question is, are there any legit ways to strike it rich out there and make it last? Here are your tips for striking it rich and making it last.

Educate Yourself About Personal Finance

I know we are all busy people. But it is imperative that you learn a little bit about personal finance, otherwise you are going to end up a statistic. Trust me when I say that the majority of the lottery winners that go broke say to others, “that won’t be me, I’m going to be smart with my money!” They too end up broke. The good news is that learning about personal finance isn’t that hard.

To start, you can read some books on the topic. Here are just a few that you should start out with:

From there, you should read blogs about personal finance. The one you are reading now is great if I do say so myself. There is a wealth of information out there and people write out their personal experiences all of the time. You never know whose story you can relate to and see things in a different light.

Be leery about investment seminars and infomercials. Most of these are a scam that will take your “strike it rich” money from you faster than you got it.

Creating A Wall

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If you don’t want to learn about personal finance or you are going with the “I don’t have time” excuse, the least you can do it make it harder for you to blow through your strike it rich cash pile. The best thing you can do is to hire a financial advisor. Don’t just hire the first one you come across, but rather interview a bunch of them to get a comfort level with them. Once you have found one, invest your money.

Invest the money as you and your advisor see fit. Make sure you understand what the advisor wants to do with your money and you are comfortable with it. Ask questions if you don’t understand things. The more complex the investment plan is, the more red flags there are. You need a basic plan and need to understand what the advisor will be doing with your money.

The ultimate goal here is to make it harder for you to spend the money. By involving a third party in order for you to get your money, you are less likely to spend it.

If you don’t want to hire a financial advisor, find an attorney that can set up a trust for you. Again, the idea is to make it harder for you to spend the money.

More Do’s And Don’ts

If you pass on the lottery for attaining wealth, here are some points to know regarding ways to strike it rich quickly.

Do find legal ways to make money. If it is illegal, chances are you will get caught and will have to pay back the money, plus fines, plus possibly go to jail. The short-term reward is not worth the long-term consequences.

Don’t fall for late night infomercials. They are scams. Ask yourself why they are selling you this idea. If it is so profitable, wouldn’t they want to keep it a secret and use it for themselves so they could be like Scrooge McDuck and build a vault of money to swim through? (On a side note, how come none of the ducks wore pants? They all had shirts, but no pants.)

Do keep your eyes open. Look around for places to make easy money – there are plenty of smartphone apps that pay you for doing basic things. You can find cheap items at yard sales and resell them online. There are all sorts of ways to make a quick buck.

Don’t let the prize distort your vision. Many got scammed by Bernie Madoff and Charles Ponzi because they had dollar signs in their eyes. Ask if it is too good to be true. Most times, you will find the answer to be yes. Additionally, don’t just jump in without thinking things through. In other words, you need to…

Do your homework. I’ve run across a lot of potential get rich quick schemes in my life. I would say I find more ways than others simply because I am always on the lookout for new ways. But, I’ve learned to do my homework. While the idea sounds amazing in your head, work it out on paper to see if you really can make money from it.

Final Thoughts

We all want to strike it rich. The thought of going to bed poor and waking up the next morning filthy rich has intrigued man since the beginning of time. The idea of instant riches has become even more profound recently with the various ways to make money and society’s focus on short-term gratification. As a result of this, get rich quick schemes have become more numerous.

Unfortunately, most are scams. The ones that truly are worth your time and effort are the ones that are not being promoted or sold by others. And this makes sense. When you find a gold mine, you don’t go telling others, you keep it for yourself.

So the keys here are for you to be smart when trying to strike it rich and then when you do, to make some changes to your life. Either educate yourself about personal finance and change your money habits or hire a professional to manage the money for you. If you do, there is a good chance you will end up another statistic.

Lastly, for those that feel as though they aren’t going to stumble upon any get rich quick schemes, there is still hope. You can get rich the old fashioned way – by saving and investing. I know, boring stuff. But if you just follow a few simple steps, you can easily become a stock market millionaire before you know it.

16 thoughts on “Trying To Strike it Rich? You May Want To Think Twice”

  1. I always find that stat about how 90% spend all their money within 5 years so saddening. I think it shows, on one level, how the mindset is off. It should be about building wealth and creating wealth that’ll last a lifetime. Of course, where’s the fun in that?! 😉

    1. Unfortunately, to many people building wealth isn’t fun. Going out and buying things is fun, which is why most end up right where they started or worse.

  2. This reminds me of the ESPN documentary series 30 for 30: Broke. They profiled many athletes who were given extraordinary contracts and detailed the struggles they faced in dealing with the sudden windfall of money. Many of them ended up blowing millions of dollars because they had no financial literacy training.

    1. I love the 30 for 30 episodes. They find a way to get me to watch even if I have no interest in the topic.

  3. I am not expecting any inheritance, much less waiting for it. It is morbid and will only make you bitter with the person you want to die. It is a smart move to spend part of it as you like, 5 or 10% because if it happens you should be able to enjoy it. But blowing in months what someone took his all life to leave you is not smart, if you loved that person you should spend their gift wisely.

    1. Another issue with the inheritance is what happens if a sibling was given more than you? Then you might feel resentment as well.

  4. I believe that striking rich without enough intelligence about managing that kind of money will only lead you back to where you were before striking gold. Am I right?
    That is why knowing how to value money and money management are really important in our lives.
    By the way, thanks for sharing this post, it was a very good and interesting one.

    1. I agree Mark. I think that the percentages show this: 90% end up broke, meaning they don’t have the money IQ to handle it, while the other 10% do have the IQ or were smart enough to have someone manage the money so that they don’t spend it all.

  5. It’s sad to think that all those lottery winners just spent all of their money within 5 years only. I’ve heard so many stories about that and I really feel sorry for those who just wasted their money because they don’t know what to do with it.

    1. I think about how excited they are and how their life is changed and just 5 years later, they are right back where they were, or sometimes even worse. So sad.

  6. You’re certainly right that people who never learn how to manage money will be broke, regardless of how much or little they have. If I won the lottery, I wouldn’t tell anyone and would probably go on about my life much like it is now. When you start buying everyone a new car or paying other’s rent, problems begin, especially with family. I think they would keep wanting more until you cut them off and they got really mad or you go broke yourself. I knew there was a reason why I don’t buy lottery tickets!

    1. You make a good point….I don’t think I would “go public” if I won either. The more people that know, the greater the chance they come to you claiming hardships.

  7. It’s definitely all too easy to spend windfall money. But if you develop good financial habits early in life and later “get lucky” it only do you good and help you progress toward your financial goals.

  8. I’ve seen those same stats about lottery winners. Whenever you throw anyone into a situation where they suddenly have a lot more money than they used to (musicians, athletes, young professionals, etc), the results are going to be disastrous. Every individual has a responsibility to learn about money or find someone who can help them. No one cares about your finances quite the way you do, so its up to you to get active and take control!

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