Want to Go Broke Fast?
Here are the Top 3 Ways
If you want to join the ranks of the failed and disheartened here is what to do to guarantee you go broke:
1. Ensure there is no plan: no Budget and no understanding your own needs – in fact work on no big picture at all – simply work on the basis of “she’ll be right mate“
2. Embrace Credit as your Best Friend: don’t bother investigating how high the interest rates are on any money you borrow (especially credit cards)
3. Don’t give a second thought to spending: foster an attitude of ‘I want it NOW’ never mind if you can afford it.
See, it is easy and simple to go broke! These three factors apply to both employees and business owners – there is also an expanded list below with some extra tips just for businesses.
The global statistics for financial misadventure are phenomenal
Alright, so it isn’t quite as easy as just these three things, there is one more key step; you have to also make sure you HAVE NO FINANCIAL KNOWLEDGE – this is very easy.
Unsurprisingly the OECD* show a very very high correlation between financial knowledge and successful wealth creation – ie if you don’t know much about managing money you are more likely to go broke! Duh!
But, what is unexpected is several recent studies have highlighted countries with apparent high levels of wealth have ‘forgotten’ the basics of Financial Management, so unless you are reading this in Malaysia or Bolivia, chances are your country’s Financial Literacy levels are falling. Budgeting and Money Management as skills have ‘flown out the window’, during the last few generations, resulting in many households and businesses suffering increased financial stress.
But first, let’s be clear about our definitions:
Financial literacy is a combination of financial knowledge, skills, attitudes and behaviours necessary to make sound financial decisions, based on personal circumstances, to improve financial wellbeing. – OECD 2014*
In line with this Aussie research* found that only about half of Australians set a budget, what’s more only 38 per cent budget for leisure activities – given we are a nation that loves to eat out and take a holiday – this leaves me wondering how useful any of these budgets really are???
What’s worse, these stats are also mirrored in the US, Ireland, Norway, Peru, Czech Republic and the UK.
It seems that where you live may also impact your ‘finance botching’ abilities!
Lack of formal education on financial training is impacting the performance of many ‘first world’ economies; leaving money management lessons up to a child’s family is exacerbating the problem because if parents don’t know much their kids can’t learn too much either! Governments worldwide, are starting to take action. – in Australia there is currently research being conducted around introducing Finance into the high-school curriculum and ASIC have begun a campaign called Money Smart.
Here are the Top 4 Business Ways to Go Broke Really Fast
- Ensure there is no plan: no business plan, no marketing plan, no understanding of your competition, or customer needs, or even your own needs – no big picture at all – lack of strategic direction is sighted by local liquidators* as the number one reason businesses go broke
- Embrace Credit as your Friend: always offer credit to your customers and then be very lax with debt collection processes (better still NEVER charge any interest on overdue accounts), plus start with insufficient seed-money. Inadequate cash flow, especially combined with high cash use was the second highest cause of business insolvency over the last quarter*
- Don’t give a second thought to spending: keep loads and loads of stock (better still stock that can’t be sold), spend up big on your office or shop fit-outs and the very latest in software and equipment, and always employ too many staff.
- Make up your prices: if you want to go broke extra quick don’t ever think about how you set your prices, simply ‘price everything to sell’ irrespective of what it costs to produce and deliver in your business.
This post is tongue-in-cheek
I will not advise anybody set their goals at “go broke as fast as possible”.
OK – I’ll come clean – Unfortunately I regularly speak with people who appear to have ‘going broke fast” as their primary goal, often without realising it!
Not even if you are just about to go through a nasty divorce (a ‘legitimate’ reason recently cited for going broke). Liquidation is an uncomfortable and lengthy process where the only people to win are the lawyers and liquidators. The good news is there are more and more tools available – especially on the interweb – that can help you gain a good footing and then keep you moving forward successfully.
How fast can you go broke?
Follow the above guidelines and you will get there in no time at all! – Double check if you are inadvertently doing any of these, even in small ways, and make sure you replace any bad habits quickly!
P.S. *I have included quite a few references to surveys and data in this post, mostly Australian – so you can be sure I didn’t make this up – for more information check out:
* OECD – Organisation for Economic Cooperation and Development: Atkinson, A. and F. Messy – OECD Working Paper No. 15
* ASIC – Australian Securities and Investment Commission: ASIC – Smart Money
* AFSA – Australian Financial Security Authority: Australian Bankruptcy and Insolvency Statistics for 2014