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The 3 Secrets To Losing Money

Updated on June 16, 2012

A Fool And His Money....

If you are interested in making money, you should do the exact opposite of what you are reading here. However, if you want to lose money, go ahead and follow my advice. I'm sure you will be much happier if you heed the warnings given in this text. Your money is too valuable to be throwing away. Luckily, you can learn the three secrets to losing your money in the time it takes to read this all the way to the end.

Put All Your Eggs In One Basket

There are many ways to achieve this goal. Maybe you think that just because you have worked for one company for 15 years that you will always have a job. Perhaps you decided to put all your investment money into one stock. Why does this always burn you in the end?

Diversification Lowers Your Risk Of Losing Money

No one sector of the economy is going to do well forever. The oil companies are going to die out eventually. The price of gold can't keep going up forever. Other stocks are cyclical depending on what the economy does. A recession could make a previously lucrative stock worth nothing in just a matter of months.

You Could Get Laid Off

This principle applies to other areas of your financial life as well. Depending on a 401k to support your retirement in full could backfire. A financial setback in your 50's could doom your entire retirement. Your employer could lay you off without any warning. Your 401k could become stagnant at best. Investing in stocks and bonds as well at least gives you some options to keep yourself afloat.


Invest Your Money On A Whim

One of the three secrets to losing your money is to invest based on emotion. Your brother asks you to lend him $5,000 to start a new company. Maybe your mom wants $1,000 to invest in an Internet company. Lending money to your family is OK. However, you need to know you are going to get your money back.

Don't Lend Out Of Obligation

You may feel obligated to help your family out. However, a bad idea is a bad idea no matter who pitches it. Just because your mom thinks that her Mary Kay sales are going through the roof is no justification for a loan. Loaning money one time may set a bad precedent as well. Remember that you have no obligation to help others should you run into money. Help when you can instead of because you have to.

There Are A Lot Of Scams

A lot business opportunities are just scams. This is why you need to take your time vetting each opportunity as it comes by. If you are convinced about the legitimacy of a business plan, you should invest a little money at first. Even if you make some money at first, go to an independent financial adviser to make sure there are no red flags to worry about. Most financial experts can spot a scam from a mile away.

Stop Budgeting Your Money

The last of the three secrets to losing your money is to stop budgeting. Who cares where your money is going. It doesn't really matter that you have money in your account, right? Spending your money without a care in the world is what you want to do. Why should you budget?

Financial Planning Is Important

Budget allows you to plan for major events in your life. You can't start thinking about retirement unless you have money saved up. Buying a home is impossible without the proper savings. You can't just go to the store and buy whatever you want. There needs to be a spending limit invoked on each purchase you make. Not having a financial plan will ruin your life forever.

Running Up A Debt Causes Poor Decision-Making

It isn't fun having a large debt. Collection calls are going to hound you until the debt is paid off. You may become desperate. Desperation is not good when dealing with your finances. You may pay off a debt with a high interest credit card. That debt may then be paid off with a higher interest credit card. Cash advances and payday loans could be the next step down the path of financial ruin. Those in debt have been known to turn to theft, prostitution and other crime to pay their lenders back. Don't put yourself in that kind of spot.

You Don't Really Need Your Money...

Let's recap the three secrets to losing your money. The first is to make sure you put all your eggs into one financial basket. The next is to make sure you lend money to whoever asks you for it. The last step is to go as deeply into debt as possible. If you follow those steps, you will be sure to never see a dime of your own money ever again. Hopefully you decide to avoid this fate by being smart with your money.

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