lifestyles of the rich and stupid

Some of the stupid things that rich people have done with their money include:

• Boxer Mike Tyson earned over $300 million in his professional career. He lost it all, spending the money on cars, jewels, and more. He eventually filed for bankruptcy.
• “Even billionaires need a budget,” begins this piece from the San Francisco Chronicle. The article describes the spending habits of Larry Ellison, founder of Oracle Corp. and one of the world’s richest men. Though his debt never exceeds 10% of his net worth, his accountant worries that he spends too much.
• Actress Kim Basinger paid $20 million to buy the town of Braselton, Georgia in 1989. When Basinger filed for bankruptcy just four years later, she was forced to sell the town.
• Wolfgang Amadeus Mozart was deep in debt when he died at 35. He was buried in an unmarked pauper’s grave.

When people make a lot of money, they’re able to spend a lot of money. The problem isn’t a single extravagant purchase, but a lavish lifestyle in which they spend more than they earn. Even the rich are subject to the fundamental law of wealth. Real wealth isn’t about earning money — it’s about keeping money.

There are also countless stories of average people who make it big through the lottery (or other windfall), and then squander their wealth in years or months. These people often come from backgrounds that provide no training for handling large fortunes. (Last fall, I wrote about tips for managing a windfall successfully.)

It’s sad to think that a lot of these problems might have been alleviated with some basic financial literacy. During the next few weeks, Get Rich Slowly will focus on personal finance fundamentals, the skills necessary to prevent you from blowing your fortune should you happen to make it big as a boxer, a rapper, or, more likely, a blogger. These are the very same skills that you need in order to accumulate wealth as an Average Joe at an average job.