How They Went Broke

By Rob Minton& John Mazzara

Earlier this year, I read a book titled "How They Went Broke: Bankruptcies and Money Disasters of the Rich and Famous," by Roland Gary Jones. Amid all this talk of a recovery in the economy lately, I started thinking about this book again.

It strikes me now that for none of the hundreds of famous people listed in the book did it say "lost it all because of a recession," or "the economy ruined him." In fact, several of the people listed in the book built or re-built fortunes during or after the Great Depression, only to squander them away much later.

The lesson there is that WE control our financial well-being, not the economy. It's easy to blame the recession for whatever hardship people are going through, and I know the soft job market is a very real problem for many, but it's important that we also don't use the recession as a crutch. Don't give yourself permission to be lax or sloppy with finances because of the economy.

Again, nobody in the book lost everything because of the economy. Here are the five main categories of fortune-losers from the book:

1. Those who lived above their means

2. Those who chased bad money with good

3. Those who had a lack of control over their investments

4. Those who engaged in speculation

5. Those with problems and legal issues.

Most of the rich and famous who became poor and famous fall into these categories. And the above categories are all results of human behavior, not the economy. Keep in mind during that as this economic recovery gains steam, we have important financial lessons we can learn from those who have gone before us.

The main lessons I learned from this book about not losing money are:

1. Live within your means

2. Don't over-leverage a business

3. Control your investments

4. Invest, don't speculate

5. Pay your taxes and stay out of court!

Remember, it's not what the economy does that determines your financial health, it's what YOU do!

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