ShmoopTube

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finance a la shmoop. how do you stay rich after you get rich ? spend less than you

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make. how's that sound yeah genius. well but pretty obvious and

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easy to do if you earn enough money to do so, right? so if you're watching this [man sits down to eat]

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video you're either rich or you plan to be, and you want to stay that way pretty

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much forever until your doing you know the backstroke Six Feet Under.

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well the way in which you got rich in the first place here matters a lot. for

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many a long successful corporate career got them to the nice houses the

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convertible Ferrari the private school for the kids the custom golf club set

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and the wine collection. their wealth just accumulated slowly over time but

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likely in two forms. in America most senior executives receive nice cash

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salaries half a million a million a few million dollars a year. they live off

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that pay and save some of it. but their real wealth usually comes from partial

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ownership in the big corporations they run in the form of stock options. well at

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the end of a career the options might have compounded for decades and be worth

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tens of millions of dollars or more. typically the executives slowly sells [stock chart]

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off those options in retirement and looks back on an awesome corporate life

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optimizing the sale of soap or lawn fertilizer or car tires or whatever they

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did to get rich in the first place. not a bad way to go if the corporate gig is

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for you and you don't read about these people going bankrupt very often because

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a well let's face it they're probably pretty boring. or at least their career

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selling soap was, and B they got rich slowly accumulating wealth quietly

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almost hidden to them and to their friends over long periods of time. they

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were technically probably rich in their mid 40s or so and they just continued to

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dance the dance that brought them to the party in the first place.

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so that's the get rich slow plan and it is time-tested it works. but what about [people throw a party]

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the get-rich-quick plan you're a 260-pound runner with a four point four

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second forty. you can read so you were accepted to Alabama where you don't

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graduate. you're drafted by the Jaguars and you get a

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million dollar signing bonus. your buddies ask you hey pal what time is it

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you look confused they say Ferrari time and ah here's

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where our story gets sad. you forget a whole bunch of things mainly that it's

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likely your NFL career will be short and when it's done you will likely have the

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earning power of a high school football coach. like you know 50 60 grand a year

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or something like that not terrible just not rich. oh and there's this other thing

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called the taxes. that million dollar signing bonus was really nine hundred

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fifty grand after agent lawyer fees travel and other stuff then he paid [equation pictured]

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taxes of three hundred fifty grand and netted six hundred K in your pocket. but

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you just went out and spent four hundred fifty grand buy that Ferrari so now you

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have just one hundred fifty grand left in your pocket to buy that home how's

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this shoebox look. so you wait hope your rookie seasons a hit and as you drive

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around in your Ferrari you wonder if people will laugh at you if you happen

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to flame out and you realize too quickly that if you go to sell the car in two

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years that'll maybe bring you 200 grand. and yeah Ferraris depreciate fast. sad

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story but way more interesting than the soap seller. in fact most NFL players

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like eighty percent of them go fully bankrupt. which means that another ten to

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fifteen percent of them end up just really really really not wealthy. how can

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this be if they played in the NFL at least at one point wouldn't you have [pie chart]

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considered them to be rich or at least rich ish? no but something bad clearly

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happened here. well in almost every case at least one of three things happened.

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they spent too much money spent on junk they didn't need or couldn't afford like

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that Ferrari. B they invested their savings into restaurants or bars or

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other things where the odds of success were vastly stacked against them winning.

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or see they got divorced. yeah always a financial killer there. well want the to

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long didn't listen version don't spend your money like you're gonna make your

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current salary for the rest of your existence.

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stuff happens enjoy life but protect yourself by holding on to enough savings

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as should things take the ugly turn. invest wisely and all that and maybe see

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a marriage counselor. if you want to know what it all boils down to, keep making

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money yeah you never have enough because you know

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what's gonna happen. that doesn't mean you need to pound the pavement selling[man goes through air port]

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vacuum cleaners till you're 95 but you also shouldn't call it quits at 45

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because you're finally a millionaire yeah a million bucks just ain't what it

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used to be.

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