Why do 70% of multi-million dollar lottery winners end up bankrupt in a few years?
Because the way they think and feel about money hasn’t changed, which means the way they use money hasn’t changed.
Just because they have more money, doesn’t mean they’ll suddenly change their financial behavior.
And this is also why earning more money doesn’t make you wealthy or lead to increased savings or investments.
The dangers of new money
Money can bring up mixed emotions such as guilt, shame, anxiety in most of us.
Suddenly having lots of money, when we haven’t dealt with our issues around money, could trigger painful memories about money (financial trauma), which then worsens our bad financial behaviors because we’re now dealing with our issues on a larger scale, with more options to self-destruct or hide from ourselves.
Most of us are carrying financial trauma, we’re just not aware of it. That’s because we think of trauma as something bloody and catastrophic; but all trauma is, is the inability to digest and accept events in our past.
Most of us have painful events in our past that we associate with money and those events then impact the way we relate to money, every time we come into contact with money.
I learned this in the middle of a past life regression session where, under hypnosis, I saw my three year old self watching my parents arguing about money. This was a traumatic event for me at that age and I made the decision that money was dangerous and money ruined love.
That incident shaped the way I would relate to money for a very long time.
It’s just like Pavlov’s theory of classical conditioning only instead of food, money is our neural stimulus and our destructive financial behavior is our unconditioned response or salivation.
If we associate money with traumas in our lives; every time we deal with money these events come to mind we’re re-triggered again and again, which affects the way we behave with money.
Or maybe it wasn’t a financial trauma, maybe it was just a simple family lesson we learned about money. That earning more money means having more to spend or that you need to use the money you earn to reward yourself for all your hard work.
So every time you get a pay check, you go shopping. So the more money you earn, the more shopping you do. I call this lifestyle creep and it’s one of the number one ways to stay in debt and it’s why 70% of lottery winners end up bankrupt.
Dealing with emotional issues about money
To change the way we feel about money, we have to be aware of our emotions about money because that’s half the battle won.
Being aware of the emotions that money triggers, will help us change the way we behave with money, and changing that behavior will help us create wealth.
Just because we earn more money, doesn’t mean we’ll suddenly start saving or investing money. These are behavioral traits we have to instill within ourselves and teach ourselves.
How to avoid feeling lost with money
Nature abhors a vacuum, so if there’s a blank in your brain about what you’ll do once you have money, your mind will be forced to fill this vacuum with something, which could lead to overwhelm.
The best way to avoid feeling overwhelmed by money is to start planning what to do with your money right now, long before you have it.
If you want to know how you’ll handle more money – look at how you handle the little money you have right now.
Your behavior with money won’t suddenly change because you make lots of money.
You can do this by writing a vision for your life or writing a list of 100 things or goals you want to achieve and/or do with your money.
Every time you achieve one of the things on your list, cross it out and replace it with something new.
This exercise will help you spend your money on the things that matter to you, and will also motivate you to make more money.
It’s not what you make that matters it’s what you do with what you make that matters
I remember when I used to coach and I asked one of my clients what information would have made the most difference in his life when he started making the money he makes today and his response was - it would’ve been nice to know all the different people who could’ve helped him manage, save and invest his money before he started making it.
The mistake most people make is that they focus all their attention on learning how to make money and not enough time learning how to make money work for them or changing the way they see and feel about money.
So here are the people you can talk to before you even start making money:
- Financial Planner/ Advisor – prepare financial plans for their clients and can help you look at all aspects of your life and help you draft a saving plan, investment plan and retirement plan. Most can even help you build your stock portfolio. Financial planners offer a variety of services so it’s important to ask your financial planner what services they offer
- Investment Banker/ Stock Broker – invest your money in the stock exchange. Stock brokers trade stocks in the stock exchange in return for commission
- Money Coach/ Life Coach - help you change your relationship with money and the way you think and feel about money. They’re not financial planners but they work like psychologists, only for money
- Estate Lawyer – helps you write your will and plan your estate taxes in the event of your death. No one wants to think of death but it’s an unfortunate reality and being prepared for it can spare them a lot of hassles and give them room to grieve your passing. I don’t plan to die soon but I do have a will because it makes financial sense.
- Tax consultant – honestly I can’t stress how important this is. The one subject I totally sucked at when I was doing my finance degree was tax so I have an awesome tax person and trust me when I say tax is the one thing you want to understand as soon as you start investing.
If you don’t want to talk to any of the experts, read financial books or financial blogs or take an online course on money and personal development. Prepare yourself for wealth, get your mind in order and surround yourself with the experts.
So yes, whilst increasing your income is very important, even more important is self-awareness and an understanding of your relationship with money, because to quote Brian Koslow, “Forget the lottery. Bet on yourself instead.”
I look forward to hearing your thoughts in the comments section below.