Many of us have dreams of vast riches — or at the very least of riches adequate to keep us in comfort for the foreseeable future. We’d like to be able to live without worrying about money, and it would be nice to get rich quickly, so that debts can be paid off, a new house bought, and your kids’ college costs paid for. In some cases, the desire to get rich quick turns into little more than greed, and the obsession of getting more money can begin to cloud your judgment. When you want to get rich quick, there are risks.
Consider these three big risks:
One of the biggest risks is being scammed. You pay money, and someone absconds with it, or uses it to fund their own risky investments. In some cases, the “get rich quick” scam is huge market-beating returns every year, á la Bernie Madoff. There are numerous get rich quick claims that you can purchase a “system” that will have you earning four figures a month in no time at all — while you do practically nothing. You buy the system, but quickly find it’s useless — and, usually, there’s no recourse, even with a “money back guarantee.” You risk handing over your hard-earned cash for nothing more than a pipe dream.
In some cases, “get rich quick” is all about leverage. You basically borrow so that you are able to trade a larger position than you might otherwise be capable of. You might trade stocks on margin, or employ a great deal of leverage in your forex trading efforts. Or maybe you buy a rental property with the dream of building an empire, so you put little of your own money down. You end up with a bigger investment, so gains are magnified. You get rich quickly, are able to more than overcome the leverage, and everyone is happy. Except…leverage is a two-way street. Your gains may be magnified, but your losses are as well. You are taking a big risk, since the leverage can mean that you lose more than you can afford to if things don’t go your way.
One of the biggest “get rich quick” dreams in the world is gambling. You have the potential to strike it rich — all you need is the right hand. Or you could plunk a quarter in the right machine at the right time. Or your dollar could buy the winning lottery ticket and experience a major financial windfall. While gambling works for some people, helping them taste riches quickly, it can often end up being a sink hole into which you pour your money without ever getting anything back.
One of the most addictive things about gambling is the idea that you can magnify your wins. I remember one trip (of many) to Vegas as a college student. I put a quarter in the machine, and won $1.50. I promptly fed the entire amount back into the slot machine. However, once my “winnings” were exhausted, I stopped. There’s a fine line between enjoying yourself and trying too hard to make gambling work, chasing winnings that may never materialize. It’s important to know when to quit, and to avoid gambling with money you can’t afford to lose.
The true key to wealth is understanding money, and learning how to manage it. We’ve all heard stories of lottery winners who strike it rich — and then go bust within a couple of years. If you don’t understand money, and if you let it manage you, rather than the other way around, it doesn’t matter how rich you are, or how quickly you become rich: You will always end up poor.