Have you ever felt like you’re the only one struggling with money? Well, you’re not alone! Even some of the most successful and famous people in history have had their fair share of financial troubles. In this article, you’ll learn about the money mishaps of some well-known figures and the valuable lessons you can take away from their experiences.
Understanding Financial Bad Habits
Before we dive into the stories, let’s talk about what makes a financial habit “bad”:
1. It breaks one or more of the 10 Golden Rules of good money management.
2. It causes problems in your personal or work life.
Remember, bad habits can get worse over time. For example, you might start by buying a few luxury items here and there, but before you know it, you’re hooked on the “high” from shopping and can’t stop.
It’s important to understand that everyone is at risk of developing financial bad habits if they’re not careful. Even highly successful people aren’t immune. This is a crucial point because many people are more willing to acknowledge their own financial issues when they realize that even famous and notable personalities struggle with the same problems.
Winston Churchill: The Big Spender
You probably know Winston Churchill as a great leader who guided Britain through World War II. But did you know he was terrible with money? Let’s explore his financial mishaps and what you can learn from them.
Lesson 1: Don’t Go Overboard on Luxuries
Churchill loved the finer things in life, especially wine. According to David Lough’s book “No More Champagne: Churchill & His Money” (New York: Picador, 2015), Churchill spent the equivalent of about $158,688 (in 2015 money) per year on wine alone. While it’s okay to treat yourself sometimes, going overboard can wreck your finances.
Lesson 2: Make Realistic Budgets and Stick to Them
Churchill often made budgets, but he had two big problems:
1. He overestimated how much money he’d make.
2. He underestimated how much he’d spend.
Plus, he didn’t have the discipline to follow his budgets. Remember, a budget only works if it’s realistic and you actually stick to it!
Lesson 3: Avoid Gambling and Risky Investments
Churchill enjoyed gambling and trading risky stocks. He often acted on “tips” from others, even famous traders like Bernard Baruch. But here’s the truth: no one can consistently make money from tips or gambling. The house always wins in the long run.
Lesson 4: Learn About Taxes
One thing Churchill did right was managing his taxes. He worked hard to minimize what he owed. You should do the same! Take some time to learn about basic tax concepts and how they affect you. It could save you a lot of money in the long run. Consider taking practical courses from tax service providers to boost your knowledge.
Lesson 5: Don’t Let Financial Pressure Lead to Unethical Behavior
Churchill occasionally sought “gifts” to help with his money troubles. This isn’t ethical, and it’s a slippery slope. If you’re under financial pressure, cut your spending, don’t compromise your ethics. Remember, people under financial distress sometimes do things they wouldn’t normally do. For instance, some people might be tempted to pad their expense accounts at work. This is stealing, plain and simple, and can lead to serious consequences.
Lesson 6: Skill in One Area Doesn’t Guarantee Financial Success
Churchill was a master strategist in politics and war, but he was disastrous with personal finance. This shows that skill in one area, even to the point of mastery, doesn’t automatically translate to skill in managing money. Personal finance is a separate skill that needs to be learned and practiced.
Mark Twain: The Dreamer and Speculator
Mark Twain, the famous author of “Tom Sawyer” and “Huckleberry Finn,” also had his share of money troubles. Let’s look at what you can learn from his story, as detailed in Peter Krass’s book “Ignorance, Confidence, and Filthy Rich Friends: The Business Adventures of Mark Twain, Chronic Speculator and Entrepreneur” (Hoboken, New Jersey: Wiley, 2007).
Lesson 1: Be Careful with Debt
Twain grew up poor, and his father’s failed land speculations left a deep aversion to debt in young Sam Clemens (Twain’s real name). However, later in life, Twain took on debt for business ventures and ended up bankrupt. It took years of hard work to pay off his debts. Be very cautious about taking on debt, especially for speculative investments.
Lesson 2: Work Hard, But Work Smart
Twain had a strong work ethic, which is great. But he often dreamed big and made poor business decisions. Hard work is important, but make sure you’re working smart too. Do your research before jumping into new ventures.
Lesson 3: Don’t Throw Good Money After Bad
Twain often fell for fraudulent schemes. Worse, he’d keep putting more money into these schemes, hoping to turn things around. If an investment is failing, especially if it’s fraudulent, know when to cut your losses. Twain himself later observed, “There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.”
Lesson 4: Get Expert Advice
Later in life, Twain befriended Henry “Hell Hound” Rogers, a successful Standard Oil executive who gave him sound financial advice. This helped Twain improve his situation. Don’t be afraid to seek advice from financial experts or successful people you trust.
Lesson 5: Be Price Conscious
When Twain published General Grant’s memoirs, he offered an incredibly high 70% royalty rate, compared to the standard 10% offered by other publishers. While generous, this left little profit for Twain’s company. Always be aware of your costs and prices in business dealings.
Lesson 6: Use Legal Counsel When Necessary
Twain made extensive use of legal counsel to protect his rights. In today’s complex legal environment, this is even more important. If you’re dealing with significant financial or business matters, don’t hesitate to consult with a lawyer.
Other Famous Folks Who Fumbled Their Finances
It’s not just historical figures who’ve had money problems. Many modern celebrities, athletes, and even lottery winners have gone broke. Here are some examples:
Sports Stars
– Jack Dempsey: This boxing champ made millions but lost it all in the 1929 stock market crash. He had to fight 42 opponents in 30 days to make ends meet!
– Muhammad Ali: Despite earning a fortune over his long boxing career, Ali lost much of it through lavish spending and failed business ventures like “Champ Burger” restaurants and “Mr. Champ’s” soda.
Modern Celebrities
According to an article published on December 6, 2018, by Insider, many modern celebrities have faced serious financial troubles. These include, among others:
– Johnny Depp
– Toni Braxton
– Mike Tyson
– Cyndi Lauper
– Willie Nelson
– Debbie Reynolds
– 50 Cent
– Larry King
– Kim Basinger
– Marvin Gaye
Lottery Winners
Believe it or not, about a third of big lottery winners end up declaring bankruptcy! According to a study conducted by Wolf Street, winning a lot of money doesn’t guarantee financial success if you don’t know how to manage it.
What Can You Learn From All This?
1. Anyone can have money problems, no matter how successful they are in other areas of life. Even CEOs and other executives sometimes struggle with personal finances.
2. Being good at business doesn’t always mean you’re good with personal finance. These are different skills!
3. Good money habits are learned over time. They don’t just come naturally, even to smart or talented people.
4. It’s important to live within your means, no matter how much you earn.
5. Avoid speculative investments and get-rich-quick schemes. Slow and steady often wins the race when it comes to building wealth.
6. Don’t be afraid to seek professional financial advice.
7. Learn from your mistakes and those of others. That’s why studying these examples can be so valuable!
8. Understand the basics of tax management. It can save you a lot of money in the long run.
9. Be wary of taking on debt, especially for speculative ventures.
10. If something seems too good to be true, it probably is. Be skeptical of “sure thing” investments.
The Importance of Financial Education
These stories highlight the crucial need for financial education. No matter how successful you are in your career, without a solid understanding of personal finance, you could find yourself in trouble. Here are some steps you can take:
1. Read books on personal finance. There are many great ones out there for beginners.
2. Take courses on basic financial concepts. Many community colleges offer these.
3. Use online resources. There are numerous websites and YouTube channels dedicated to teaching personal finance.
4. Consider working with a financial advisor. They can help you create a personalized plan for your financial future.
5. Practice what you learn. Knowledge is power, but only if you put it into action.
So, next time you’re beating yourself up over a money mistake, remember: even Winston Churchill and Mark Twain messed up sometimes. The key is to learn from these mistakes and develop good financial habits that last a lifetime. By understanding the pitfalls that have tripped up even the most successful people, you can work on building a more secure financial future for yourself.
Remember, financial wellness isn’t about how much money you make, but how well you manage what you have. It’s about making informed decisions, living within your means, and planning for the future. Whether you’re just starting out or you’re well into your career, it’s never too late to improve your financial habits.
By learning from the mistakes of these famous figures, you can avoid similar pitfalls in your own life. Stay informed, be cautious, and always strive to make smart financial decisions. Your future self will thank you for it!
