Tennis legend Boris Becker is in news – for wrong reasons. He is having auction off his trophies to pay off his debts. Even then, the debt will not be fully repaid. To think of it, he was the youngest Grand Slam champion & considered one of the greats in tennis. He won Wimbledon when he was just 17!
At that level, tennis does pay a huge amount of money! So we can safely assume, that he would have had no dearth of money.
Boris Becker is not the only celebrity to be rich, yet bankrupt. There are ample examples. For example, Michael Jackson died, he was in huge amount of debt.
It is often said, maybe correctly to a great extent – It is not your income but your savings that make you rich. The celebrities with high earnings and net worth becoming bankrupt are such examples. While there can be multiple reasons for bankruptcy – bad investments, divorce, frauds, extravagant lifestyle etc, bankruptcy of it can be avoidable with good personal finance habits.
Can you be wealthy in long run even with not so high income?
While you need a decent income to begin with, income alone doesn’t guarantee wealth over a period of time.
For instance, may be earning just $40,000 dollars a year (or equivalent on your currency) but if you are able to save a chunk of it – say, 25% consistently, over long run you can build a sizable corpus. With low expenses, it can last for a good amount of time.
At the same time, even if you earn 10X of $40,000 a year – i.e.. $400,000 and blow it up, you will soon end up using your income. (Not difficult to – a fancy house, upgrading fancy cars, luxurious vacations, expensive food & alcohol will suffice to blow up this money!). Or maybe, land in a debt soon. To get out of this trap, you’ll need substantial course correction in your lifestyle. Else you may soon end up being rich yet bankrupt!
Having some money is a good start. But beyond that, it is you savings and subsequent investments that make you rich.