Here is a list of people you might know who have lost massive amount of money.
- Johhny Depp
- Nicolas Cage
- Burt Reynolds
- Toni Braxton
- Sharon Stone
- Mike Tyson
- Cyndi Lauper
- Kim Basinger
- Floyd Mayweather
- Michael Jackson
Some of them recovered. Some didn’t.
It makes one wonder, how this happened. What went wrong? To answer that, let us go through this story about the former NBA player, Shaquille O’Neal.
The basketball legend spent $1 million in one day after signing an endorsement deal with a trading card company. He reportedly bought two Mercedes Benz cars, paid off his mother’s home mortgage, and bought jewellery for himself.
He was heading in the same direction as those in the list above, but then something happened.
An interaction with celebrity business manager Lester Knispel at a bar taught Shaquille O’Neal a fundamental lesson about personal finance.
“He had a piece of paper and said: ‘This is $100’ — [then] ripped it in half,” the NBA Hall of Famer recounted to Yahoo Finance. “He said: ‘You save $50, you can play [with] the other $50. But the difference between rich and wealthy is you rip the $50 in half and with the $25, you can do whatever you want. But with that other $25, you save it.’”
The elaborate analogy and demonstration taught O’Neal to attempt saving 75% of his earnings for taxes, retirement, investing, and long-term savings. In fact, according to Shaq, his savings plan enabled him to avoid touching the $40 million deal he signed with the Orlando Magic in 1992.
For most people, attaining O’Neal’s high net worth — he made $700 million during his playing career and now sits on the board of Papa’s John’s (PZZA) — is out of reach.
The one simple thing he did, and many failed to do, was to save more than he spent.
The more money you make, the more you should save. You can save and still have fun. And have enough for the nights that will follow.
