Blog | Commodities, Personal Finance

How People Go Broke

Recently, I had a chance to talk with John MacGregor, author of The Top 10 Reasons The Rich Go Broke. His background goes back 25 years ago when he had a very successful financial planning practice. John then went on the institutional side where he was just doing pension consulting, corporate consulting. He also worked as a national retirement director. So, he has really seen the good and the bad and the ugly.

Five years ago, business guru Robert Kiyosaki approached him and told him all these stories about people who had everything, then lost it all. They decided to write a book together. Fast forward to today.

This is a timely topic because a lot of the rich are going broke. There is a lot of uncertainty due to the Corona virus. It's a tragedy.

When you look at the financial landscape, what a question mark! The Fed is printing money like we've never seen before. We're in uncharted territory. Unemployment is really, really high and the stock market is being propped up by Fed money.

Like other wars and other pandemics, we'll get through it. Some of us better than others.

What's the number one reason that people fail and go broke? And what can you do to put yourself in a better position? I turned to the expert to find out.

First of all, as John outlines in his book, people create their belief system based on things they see and listen to, right from birth. By the time they're in their mid-20s or early-30s, their belief system is hardwired.

Most people have a harmful belief system about money. They think: I'll never get out of debt. It's too complicated. I wasn't good at math. I wasn't taught this in school. I didn't grow up with money. I'll get to it later.

And the big one is: I don't have time to deal with this right now. But you do have the time. So, let’s make the best of it.

One way to relieve a lot of financial stress is just start by getting financially organized. You can download a free organizational tool from John’s website -- Johnmacgregor.net – to get started.

According to John, five years ago, 73 percent of people were living paycheck to paycheck. Today, 78 percent of people are living that way. Meanwhile, less than one percent of Americans look at their finances and a budget. Let’s put you in that one percent.

Sit down once a week or at least once a month and look at your budget. Get a handle on how much money came in and how much money is going out. Look back at every expense for the past three months and determine if that expense is a need or a want. Look at alternatives for your wants. If you go into the movies all the time, maybe you dial that down to some Netflix. You may realize you are spending so much more money than you should. And you won't be sacrificing much happiness or fun if you cut back.

As John often says, this isn't an information issue. This is a behavioral issue. Most people know what they need to do with their money, just as they do with their health and wellbeing. Most people know they need to exercise and eat better, but they don't do it.

If we all changed our behaviors, we would all be rich, skinny and happy. What people need to do is get to the core of their mental programming.

Basically, the brain has two components: your conscious and your subconscious. Your conscious mind controls five percent of your thinking. Your subconscious controls 95 percent, including your habits -- how you think, how you behave, who you are and ultimately who you become.

Change your subconscious and you can change your life forever. His book gets to solutions on how to do it.

The other key thing John is telling people to do now is to use their downtime to get their wills, your trusts and power of attorneys in order. Did you know that 64 percent of people die without a will?

They will actually get a will created for them by the probate court judge. The last thing you want to have happen is a judge determining your wishes and creating all sorts of family problems. You can get a will done in many states for free but he recommends an attorney if you could afford it.

The third thing, the other critical thing, to increase the revenue side of the page is look at educating yourself. Now is a perfect time for a course on money so you can come out of this in full stride and with a strategy.

John’s book is just a fabulous addition to anybody's library. And if you would like to learn more about financial case education, you can always drop by and learn from the resources at thecashflowacademy.com.

Personally, I can handle problems, if I have a plan to make it temporary. I might still be in the midst of the problem, but if I have a plan and I believe in that plan, that will get me through.

If you have a plan to improve your future, that goes a long way to lowering your stress and making your life better.