"It is madness to risk losing what you need in pursuing what you simply desire"
How to Go Broke: The Hidden Dangers That Sink the Wealthy
People think going broke means overspending or blowing it all on cars and vacations. No, this is what KEEPS you broke.
Once you’ve built up wealth, the real danger is risky investments. And I don’t just mean bad ones — I mean seductive ones. The kind that feel like smart moves… but are actually just big bets in disguise.
Here’s how it usually goes sideways, and what to watch out for:
1. Chasing Deals You Don’t Fully Understand
Once you’ve had success, it’s easy to believe your instincts can guide you into new territory. That’s when people start dabbling in private equity, angel investing, or the next “can’t miss” real estate deal. And it feels smart — you’re investing, right?
But it’s not investing if you don’t understand it. It’s betting.
I’ve seen people lose hundreds of thousands backing early-stage companies or niche funds they barely understood. It is ok, you are not alone. Even some of the brightest minds fell for Theranos. They weren’t dumb, they just stepped into something they couldn’t see clearly.
The sexier or more exclusive an investment sounds, the riskier it probably is.
If you can’t explain it simply — or it takes a 30-page presentation to make sense — just pause. Consider that it may not be right for you.
2. Loading Up on One Stock
I’ve met people who built extraordinary wealth from company stock. And I have seen that one stock go from $2M to zero. Yes, ZERO.
It’s hard to let go of what made you successful. But when the company stumbles, it can take your portfolio down with it.
Enron is the classic example. Employees had their whole retirement in Enron stock. When it collapsed, they lost everything. And JPMorgan showed that 40% of individual stocks experience a permanent 70% drop.
Diversification might not be sexy, but it works. It is the financial meat and potatoes.
3. Taking on Too Much Real Estate Debt
I’m all for real estate. Done right, it’s a solid part of your portfolio. But here’s the catch: leverage works both ways.
When prices are rising, leverage makes you look like a genius. But when values dip—or rates rise—it can flip on you fast.
In 2008, I watched developers with hundreds of properties lose it all. They weren’t bad investors. They were just over-leveraged. Their debt didn’t go away when property values dropped, and their cash flow couldn’t keep up.
Look at Harry Macklowe. He went big on Manhattan real estate—$6.8 billion worth—mostly with borrowed money. When the market shifted, he lost nearly everything.
So if you’re using leverage, ask: “Can I still hold on if things go south?” Because if the answer’s no, you’re not investing—you’re gambling.
How to Keep What You’ve Built
If you’ve already built wealth, awesome! Great work!
Now, protect it by not risking it on shiny opportunities that turn out to be traps.
Before investing, ask yourself:
- If this goes to zero, am I still okay?
- Am I too heavy in one company, property, or sector?
- Is this actually investing — or am I just hoping it works out?
Real wealth isn’t about how much you make. It’s about what you keep.
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This week, I had the privilege of being featured on South Carolina Public Radio, where I discussed “What Business Owners Should Understand Before Retiring.” It was an incredible opportunity to share strategies and key considerations for a smooth transition into retirement.
