Pillar #8: No One Owes You Squat!
If you think anything is owed to you, prepare yourself for a rude awakening. Yes, that means you are responsible for your own retirement, health care, and everything else you need. While you may have a pension or guaranteed healthcare plan today, check the promises made by the government or your employer. Many of those promises are impossible to keep.
Too many people retired counting on their pensions—public and private. These folks kept up their end of the bargain, but that makes little difference when there’s no money to pay them. Future generations need to learn from those mistakes.
Some friends recently told us their children got jobs at the police and fire departments. They were pleased because they thought they could work hard, earn a decent living, and have a nice pension waiting for them in a few decades. Ask anyone who worked for the City of Detroit what they think about that plan.
Don’t spend your money thinking you can count on others to support you in your old age. They might, but you’ll lose your independence and probably not be happy. Too many people in this situation have never learned to save; they allowed someone else to do it for them. Save more than the minimum. You will never regret it.
Pillar #9: Something for Nothing Teaches a Bad Lesson
We’ve all heard stories of people winning millions in the lottery and quickly going broke. Ever heard of “Sudden Wealth Syndrome?” There is such a thing, and it’s completely related to a huge (often unearned) windfall.
Why do seemingly intelligent people who suddenly have a lot of money blow it? Their first reaction is to look at all the cool stuff they can buy. If you win $10 million and buy a $2 million home, you still have $8 million left. Then again, if you also bought a $1 million boat you still have $7 million left, much more than you ever had before. That rationale soon leads people right down the drain, and the money is gone.
Pillar #10: Live off the Interest and Never Touch the Principal
I saved the most important pillar for last.
In the case of lottery winners going bust, it’s almost always the same: If you won $10 million and invested it wisely, you could easily net $500,000 a year while your portfolio grew ahead of inflation. In most cases, the income from their winnings could provide a phenomenal lifestyle. And they could pass along the money and sound financial principles to their children.
I recall Johnny Carson discussing having a lot of money with Bert Reynolds. Carson commented, “Having money means you never have to worry about money.” While that contains some truth, it’s an oversimplification. You also don’t have to worry about all the things you have to do to earn money. That’s what causes stress and takes years off of our lives.
Having money is important, but it’s only part of the puzzle. Understanding what money means, what it can do for you, and prioritizing wealth accumulation are also critical pieces.
If I have to make a choice between leaving my children and grandchildren with money or the basic principles of growing and maintaining wealth, I’d choose the education every time. It will make them hell-bent on keeping the money they earn and educating the next generation to do the same.
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