blogs

I read recently about a man in England who hit the lottery and is now broke. I always find these kinds of stories interesting. Every time I see a "winning the lottery ruined my life" story or TV show, I’m intrigued. How is it possible that winning $70 million ruins your life?

I guess the only conclusion is that people who are bad at dealing with money are bad at it no matter how much they make or have. If you’re disorganized with your finances, don’t think through your spending and don’t plan ahead, you will wind up in trouble – whether you make $40,000 a year or $400,000. You can’t, as Dave Ramsey likes to say, out-earn stupidity.

To me, there is no excuse for being stupid with your money. There is so much information available out there, it’s unimaginable that anyone would be so clueless with their finances that they could blow $70 million in 10 years.

People make money matters much more complicated than they need to be. You don’t need to understand what a "mortgage backed security" is to run a household. That’s why I like to keep things as simple as I can.

In the plainest terms, here’s what every set of parents needs to have (financially speaking, of course):
1. A monthly budget
2. An emergency savings fund – 3 to 6 months of expenses
3. A retirement plan (401k, IRA, etc.)
4. College funds for the kids
5. Health care (one of the biggest causes of bankruptcy is medical costs)
6. Term life insurance
7. A will

If you could get this list together, you’d have your financial life in pretty good order. And you could stop wasting your money on lottery tickets.