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Reasons Why Most People Are Still Broke (Avoid at all
Cost)
By Steve
Burns
08 May 2023
Many individuals find themselves in a constant state of financial
struggle. What are the reasons behind this? Let’s look at some
insights by wise investor and businessman Charlie Munger to uncover
the core mental models and issues contributing to financial troubles.
Charlie Munger says there are only three ways a smart person can go
broke: liquor, ladies, and leverage. Munger also gives us seven
reasons why people stay broke and never get rich in the first place.
What is the
mindset of being broke?
-
Envy is
expensive
-
A lack of
financial focus
-
Arrogance is
expensive
-
Most people
just don’t put in the work
-
They’re bad
at understanding the odds
-
They follow
the herd
-
They spend
their time with the wrong people
Envy Is Expensive
“The world is not
driven by greed; it’s driven by envy.” – Charlie Munger
Envy can be a significant drain on your financial resources. You’ll
never feel satisfied when you’re constantly comparing yourself to
others and coveting their possessions or lifestyle. This
dissatisfaction leads to unwise spending and bad financial habits. In
a world where people are generally better off than in the past, the
focus has shifted to what others possess. The unfairness of wealth
distribution becomes the center of attention, leading to envy-fueled
spending.
“The fact that
everybody’s five times better off than they used to be, they take that
for granted,” Munger said. “All they think about is somebody else
[has] more now, and it’s not fair that he should have it and they
don’t.” – Charlie Munger
Too many people stay broke as they waste too much money on spending
and going into debt, trying to keep up with their neighbors or family,
not knowing what the income level or how much debt the people they are
envious of have. Envy is very expensive, while contentment is cheap.
A Lack Of Financial Focus
“I succeeded
because I have a long attention span.” – Charlie Munger
Financial success requires focus and dedication. If you can’t focus on
your financial goals long-term, you’ll find yourself floundering. Set
clear objectives and remain steadfast in your pursuit of them. A lack
of focus can result in impulsive decisions and a failure to progress
toward financial stability.
“The desire to
get rich fast is pretty dangerous.” – Charlie Munger
Getting rich takes time, effort, and focus.
Arrogance Is Expensive
“Smart people
aren’t exempt from professional disasters from overconfidence.” –
Charlie Munger
Overconfidence can be a costly mistake. Even the most intelligent and
accomplished individuals can face financial ruin if they let arrogance
cloud their judgment. It’s essential to remain humble and recognize
that you’re not infallible. Always be willing to learn and adapt to
new information and situations rather than assuming you know best.
Experience is an endless teacher, and arrogance causes expensive
lessons.
Most People Just Don’t Put In The Work
“Spend each day
trying to be a little wiser than you were when you woke up. Discharge
your duties faithfully and well. Slug it out one inch at a time, day
by day. At the end of the day—if you live long enough—most people get
what they deserve.” – Charlie Munger
Financial success doesn’t happen overnight; it takes hard work,
patience, and consistency. Many people don’t make the necessary effort
to improve their financial situation, instead opting for shortcuts and
get-rich-quick schemes. By dedicating yourself to growth, learning,
and taking small daily steps, you’re more likely to achieve lasting
financial stability.
They’re Bad At Understanding The Odds
“Life, in part,
is like a poker game, wherein you have to learn to quit sometimes when
holding a much-loved hand—you must learn to handle mistakes and new
facts that change the odds.” – Charlie Munger
Understanding the odds is crucial in making sound financial decisions.
If you can’t assess risks accurately, you may make costly mistakes.
Recognizing when to let go of a losing investment or acknowledging
that a situation has changed requires adaptability and rational
thinking.
They Follow The Herd
“Mimicking the
herd invites regression to the mean.” – Charlie Munger
Following the crowd can be detrimental to your financial well-being.
When everyone jumps on the latest investment trend or spends money on
the latest fad, you may feel compelled to join in. However, this herd
mentality often leads to mediocre results or financial ruin. Instead,
think independently and critically about your financial choices.
They Spend Their Time With The Wrong People
“Oh, it’s just so
useful dealing with people you can trust and getting all the others
the hell out of your life. It ought to be taught as a catechism. Wise
people want to avoid other people who are just total rat poison, and
there are a lot of them.” – Charlie Munger
The company you keep can have a significant impact on your financial
success. Surrounding yourself with trustworthy, reliable, and
financially savvy individuals can help you make better decisions and
learn from their experiences. On the other hand, associating with
negative influences can drag you down and lead to poor financial
choices. Be selective about the people you allow into your life, and
seek out those who share your values and aspirations.
Key Takeaways
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Avoid envy-driven spending and focus on your
financial well-being.
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Maintain a strong financial focus and dedicate yourself to achieving
your goals.
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Stay humble and be aware of the dangers of arrogance and
overconfidence.
-
Make consistent efforts to improve your financial situation, one day
at a time.
-
Develop a solid understanding of risk and odds to make informed
decisions.
-
Don’t blindly follow the crowd; think independently and critically
about your financial choices.
-
Surround yourself with trustworthy, reliable, and financially savvy
individuals.
Conclusion
Achieving financial success is a challenging endeavor that requires
discipline, focus, and hard work. By understanding and avoiding the
pitfalls outlined in this blog post, you can make significant strides
toward financial stability. Steer clear of envy, maintain your focus,
remain humble, and consistently work towards your goals. Develop an
understanding of risk and odds, think independently, and surround
yourself with the right people. Doing so will make you well on your
way to a more secure financial future.
Green Play Ammonia™, Yielder® NFuel Energy.
Spokane, Washington. 99212
509 995 1879
Cell, Pacific Time Zone.
General office:
509-254
6854
4501 East Trent
Ave.
Spokane, WA 99212
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