We hear all of the horror stories about lottery winners who end up broke and miserable. Large windfalls of money can be difficult to manage if we are not prepared. I see some entrepreneurs face similar challenges as their businesses suddenly create drastic increases in monthly cash to the owner or windfalls of wealth from a sale.
I met with a former student who is facing the possibility of winning one of life’s lotteries with his business. A sudden opportunity is creating the possibility of significant profits over a very short time. But, he seems to have his head on straight. He is already planning to use this influx of capital to help build his business.
So why are some people better able to handle situations like this? I believe most of them were brought up with an understanding of how to manage money. I also believe that they were raised with values that were not as materialistic as others. To them money is not the end, but rather a by-product of working hard and living a good life.
Scott Burns (free registration required for this site) suggests that we look to a popular book, Getting Rich in America, for some answers on how to put wealth in its proper perspective.
Here are the eight rules from that book and my thoughts on them (for what they are worth):
1. Think of America as the land of choices.
Each choice we make can affect our character. What kind of business we do we choose to start? Who do we choose as our business partners? How will we treat our customers and our suppliers? How will running our business have an impact on our family? Virtues are simply habits we form by doing what is right.
2. Take the power of compound interest seriously.
Start saving when you are young. A dollar saved when you are twenty will be worth so much more when you retire than a dollar you save when you are fifty. As I wrote about recently, many baby boomers did not learn that lesson and are trying now to make up for lost time.
3. Resist temptation.
As may father always says, “Pigs get fat and hogs get slaughtered.” Don’t spend money until you have it, and don’t waste it on things that cost a lot but have very little value. Be frugal.
4. Get a good education.
If you are an entrepreneur, learning about the process of entrepreneurship will almost double your odds of success. But beyond that and more importantly, a good education will make you a more interesting person and a better citizen.
5. Get married and stay married.
Amen.
6. Take care of yourself.
I began to have some health issues as our business grew very rapidly and we began to look at options to sell. Stress takes its toll on you. My brother says I aged in entrepreneur years during that time, which he says are about like dog years.
7. Take prudent risks.
Successful entrepreneurs are not gamblers, but they will take risks that are well thought through and well planned for.
8. Strive for balance.
If you follow rule #5 you will only be married once. You only have one chance to be a good parent. Good friends take work.
You can and you should be so much more than an entrepreneur in your life.
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