The Curse of the Accidental Millionaire is not realizing that you are a millionaire!
What I mean by the previous statement is that instead of saving the money you earn and making it work in investments to become rich, you just increase your lifestyle to match your new income level and status.
The problem is your stint as an Accidental Millionaire may be short-lived if you don’t have the assets to back it up!
The Curse of the Accidental Millionaire is really about a friend of mine. At one time he was a highly paid director for a decent sized company where he had about 46 people reporting to him.
He had it all, a BMW, a half million dollar house in the mid-west (which is the typical McMansion that everybody talks about), a country club membership, and the most elaborate vacations!
Why I remember him telling me that for New Years Eve, he took his wife to the Hilton hotel and spend over $1,000 just for that night! Speaking of his wife, she of course has a $10,000 diamond wedding ring, with an equally expensive wedding wrap. My friend and his wife would eat at restaurants that ran well over $100 for just the 2 of them.
Then misfortune happened, while I’m not sure of the exact details, he decided to work for a different company. That company paid well too, until they laid him off…
Today he has nothing, my friend and his wife got a divorce and together they owe about $100,000 in debt.
If my friend had sunk that money in a balanced investment portfolio and controlled his spending by living below his means, I calculate that he would have a net worth between $750,000 to $1,000,000 dollars today, or perhaps even more!
So the takeaway for me from watching his experience with money are as follows:
- Live below you means and don’t scale you spending up as your income increase by large bounds.
- Buy into investments that reduce your taxes while you are earning such a large salary… such as 401ks, IRAs (if you qualify) and other retirement options. That way you actually save more of what you earn instead of paying the tax man. Later when you are retired and you are in (most likely) a lower tax bracket, they will get less of your hard-earned money!
- Chose a practical, frugally logical spouse over one that has no clue about money. I married a frugal accountant and that made all the difference!
- Pay attention to past stories about your potential mate, if they tell stories of going on elaborate vacations and still have an actually engagement ring from a previous failed engagement… These little warnings should set off loud alarm sirens in your head!!!
- Schedule an appointment with a fee based financial advisor! Perhaps those third party eyes will tell you if you are on or off the proper financial road or not!
And so concludes the story of my friend that fell victim to the curse of the accidental millionaire. Don’t let this happen to you, learn as much as you can about finances today, and work with your spouse to try and establish your financial goals, to ensure a smooth path to riches!
Readers, do you know of any accidental millionaires that were cursed to lose it all because of poor financial planning or other issues?