More Money, More Problems

"Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much" ~ Luke 16:10

Whether or not you're religious, this scriptural text provides a lot of wisdom about managing material possessions, especially money.  The main message here is "If you can't handle a little bit of money, you won't be able to handle a lot of money."  

I've seen this situation play out more than once.

Bad money habits are not confined to those with very little wealth, nor are those bad habits resolved by wealth alone.

It seems that those with bad money management skills tend to retain those habits, even when their financial situation improves, whether that be due to an increased salary, a bonus, or a large inheritance. 

Lottery Winners

Perhaps the most obvious example of this can be seen with lottery winners. There was an interesting study done that looked at bankruptcy rates of those that received large cash windfalls against the normal population. And while cash windfalls reduced bankruptcy rates in the first two years, that was not the case in years 3-5, meaning those that received cash windfalls still ended up bankrupt, albeit, a few years down the road.

In other words, in most cases, the cash windfall did not prevent bankruptcy, it simply postponed bankruptcy to a later date. It would seem that those who receive large inflows of cash don't often use it to reduce their debt, but rather, increase their standard of living. 

Professional Athletes and Celebrities

We even see this play out at a much greater level with professional athletes (like Mike Tyson) who suddenly have enormous wealth, only to be bankrupt years later from excessive spending. Even some very famous actors (like Oscar-Winner Nicolas Cage) have encountered financial difficulties due to uncontrollable, eccentric purchases. 

What surprises you more? The fact that Nicolas Cage is an Oscar-Winner or the fact that he ended up broke after accumulating hundreds of millions in acting jobs? Either way, his "national treasure" didn't last long.

Mo Money, Mo Problems

In essence, bad money habits transcend wealth. If you struggle to manage a small amount of money, you will likely struggle to manage a large amount of money. This is why it's important to deal with those bad habits now, regardless of where you're at on the wealth spectrum.

So many times, we use the excuse that if we just had more money then we would be better at saving. Or if we just had that new car or a new house, then we could get on track with our spending. The fault in that logic is that, for those with money problems, nothing will ever be enough. Because lack of money is not the root of the issue, a bad relationship with money is the issue. That's why we see very wealthy people struggling with the same thing. 

And while there is value and peace in financial security, more money won't fix your bad money habits. It will only provide more opportunities to practice those bad habits.

Call to Action

So my call to action is this: Start building good money habits TODAY! Don't think that all of your problems will be fixed when you get that next raise or a new job, because the underlying problem will still be there. Instead, there will just be a bigger dollar figure assigned to that problem. 

Start with being the best steward of the small amount of money you have today. Build healthy habits around saving, spending, and debt, so that when you do eventually have a large amount of wealth, you can use it for things that actually are meaningful.