Don’t Squander Your Good Fortune

Perhaps those that have the most talent also tend to live closest to the edge financially.  An individual who is able to make a lot of money through his or her talents often thinks that he/she can always make up for any overspending.  A singer who makes $10 million a year will believe that she can afford lavish vacations and expensive clothes because she will always have $10 million per year coming in.  Even people with lower incomes that are still substantial – for example, the executive who makes $250,000 per year – still tend to believe that they can afford to take out expensive home loans and run up the credit cards because that big paycheck will always be in the mail.  A recent post by Dan Miller, however, shows that talent isn’t enough to ensure a self-sufficient future

First of all, there is always the chance of an injury preventing you from doing your job anymore.  Your chances of being disabled are far greater than the chances of being killed.  For this reason, everyone should have disability insurance.

Even if an injury doesn’t befall you, however, it may be that changes in the industry or within your company may cause you to become out of work.  Many in their sixties or even fifties who find themselves laid off often find it difficult to find a comparable position at anywhere near a comparable pay rate.  After years of doing the same thing, your talents may not match what another company is looking for.

This is why it is important to be building your pipelines while you are able.  You want to have money flowing into your bank accounts whether you work or not.  Divert some of your resources from each paycheck into investments.  Saving money for retirement isn’t enough – you must put money away in taxable accounts as well to provide a source of income should you no longer be able to work.  Even if you are simply out of work for a period of time, that steady income stream from investments will allow you to calmly search for another job rather than desperately searching because you need to replace your income immediately.  Remember that those who are desperate are never in a good position to negotiate.

Also, avoid taking out debts and pay as much off as you can.  No one can repossess your car of you own it.  Your home is safe if it is paid off, assuming you can afford the property taxes.  There won’t be any nasty calls to your house from credit card collectors if you don’t have any credit cards.  Minimize your recurring payments as much as possible so that you can easily cut back as needed.

Just because you have great talents and are able to make a lot of money doesn’t mean it will last forever.  Remember to build your pipelines to assure your financial future.  Your family is counting on it.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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