How Does a Millionaire Become Bankrupt?

Bad Investments

All millionaires, by definition, are worth upwards of a million dollars. This does not mean that they physically possess over a million dollars in a bank somewhere. Most millionaires have a large number of investments that are collectively worth the million dollar mark. When millionaires hold most of their funds in single business or stock, they are then set to lose hundreds of thousands of dollars in a single bad transaction. When this happens, a sort of landslide effect occurs in which they no longer have the money to make more money to cover daily living costs--the millionaires become bankrupt.

Over-Extended

A millionaire can be thought of as an empire: when the empire is over-extended, it will fall. Millionaires often purchase several expensive houses, own more cars than they know what to do with, and hire staff they never see to perform tasks they did not know they needed. Occasionally, when this happens, a millionaire will begin paying out more money than he is making. Since millionaires seldom track their own finances, this shocking revelation can come too late. While most millionaires will try to liquidate some properties and sell off a few expensive pieces of art, this attempt can come too late to prevent a bankruptcy. This type of bankruptcy happens most commonly to athletes, celebrities and musicians, since they often reach a point in their careers when the money stops flowing like it once did. However, they find it hard to adjust their lifestyles back to the way they used to be, and the result is bankrupt millionaires.

Theft

Many millionaires have gone bankrupt as the result of theft. Some entrepreneurs get into business with bad partners who take all the funds used for a business and hop on a flight across borders. Many millionaires simply sign on with bad accountants or agents who squander every dime of the millionaire's fortune. Since millionaires seldom track their own wealth, these vultures find it quite easy to take advantage of the people they are supposed to be keeping financially safe. No millionaire is safe from going bankrupt in this way. For this reason, millionaires must be very careful in choosing who will help them financially.