Why Making Your First Million Is Not Enough
The problem of having too much money
Many people set a goal of becoming a millionaire by a certain age. That is a worthy goal. But, as I found out when I made my first million, it’s not enough to simply meet your goal. Because once you do finally achieve it, there are other implications that require further planning and goal setting.
In short, there are a whole host of new problems that come with having too much money.
Those of you who are struggling financially might scoff at this, but I can assure you it’s true. This is not to say that the problems of the rich are more valid or important than the problems of the poor. No matter what financial state you are in, you will have problems. Progress is made by meeting the challenges of your stage of life—not by comparing yourself to others.
Have a plan to become rich…and stay rich
My rich dad told me something very wise when I was younger, “If you want to be rich, you must have a plan on how to make a lot of money. You must also have a plan in place for what to do with that money after you’ve made it. If you do not have a plan in place for what to do with the money you make before you make it, you will often lose it faster than you made it.”
The problems that come with too much money include exposure to high taxes, degradation of your wealth due to inflation, having to open multiple bank accounts once you have too much to put in one place, and, for some, the temptation to spend more money.
Spend your money on assets, not liabilities
One of the reasons rich dad had me study real estate investing was so that I would understand how to invest in real estate before I had a lot of money. He knew that I would need a place to invest my money once I made it. He also knew that real estate would protect me from high taxes, inflation, having too much cash on hand, and the temptation to spend.
Today, when my accountant calls and says, “You have too much money. You need to buy more investments,” I already know where to move my money, the corporate structures to use, and what to buy with that money. I call my broker and buy more real estate. In other words, when my accountant calls, much of my money is already spent according to a pre-determined plan on expenses, like real estate, that make me richer and more secure financially.
Over the years, I have seen many people start very profitable businesses and still end up broke. Why? Because they did not control their expenses. Instead of spending money to acquire other assets, such as real estate or paper assets, they expensed it through frivolous business expenses, or bought liabilities like bigger homes, nice boats, fast cars, and new friends. Instead of getting financially stronger, they became financially weaker with every dollar they made and then spent.
Invest in financial education
At the end of the day, the dividing line between those who continually grow their wealth and those that become rich and then go broke is financial education. If you want to be rich—and stay rich—always be learning and growing your financial intelligence. Then, you’ll know what to do when the time comes.