So when you've made a pile of money, what are you going to do with it?

David Mellor

David Mellor is CEO and Course Director of Audio Masterclass. David has designed courses in audio education and training since 1986 and is the publisher and principal writer of

Friday December 31, 2010

There's no harm in having a little dream once in a while, and it can be a useful incentive to imagine yourself where you want to be in a couple of years' time.

So imagine you have just had a hit record. What are you going to do with all that money?

Spend it!

OK, since your money is going to disappear anyway, as we shall see in a moment, this might be the very best thing you can do. A new Porsche won't last a lifetime, but it will be a hell of a lot of fun now, so why not!

Let hangers on whittle it away

Let's see... you'll need a secretary, a driver, a bodyguard, a personal hairdresser, manicurist, pedicurist... Oh no! That other guy on the same label has a bigger entourage. You'll have to get more people.

Get divorced

Whoops! Half of it has gone in an instant.

Buy more gear!

So you made your fortune using the equipment you have, and you now want to change it? That would be crazy... don't change a winning formula. A winning formula can win at least a couple of times more.

Buy a big house

Good idea. You can live in it. Don't buy too close to the sea. Be aware though that real estate is overvalued. Look at all the land that doesn't have houses on it. Suppose that land suddenly became available for building. What would happen to the value of your house then?

Put it in a bank

That's mad. The whole purpose of banks is to get their hands on the money that is made by people who actually work for a living. Banks don't produce anything at all. The next thing that will happen after you have deposited your money is that they will invite you in for a 'Financial Health Check'. That's where they check to see how stupid you are.

Oh and banks can go bust. Put it another way... banks do go bust. They all go bust eventually. Look at banking history. (Unless of course they get bailed out by the taxpayer!)

Put the cash under the bed

So since you're not going to trust the banks, you'll trust the government instead! Did they not tell you at school that money is a fiction that only works if people believe in it? Oh, of course they didn't. That would put the seeds of doubt in people's minds and we would all see money for what it is - just paper and numbers. Do you know why inflation exists, and the value of your money goes down year after year? It's so that the value of the government's national debt goes down, at the expense of ordinary people like you and me.

Buy bonds

You're trusting the government again. Governments around the world borrow, borrow and borrow. There can come a point where they realize they can't keep up with the interest payments. So at best they can give you a 'haircut' and pay you back a percentage of the value of your bonds. Or they can default entirely. It happens. Or they can create hyperinflation so that the value of their debt shrinks to zero. And the value of your bonds shrinks to zero too.

Buy gold

Well gold hasn't gone entirely out of fashion ever in its history. But it's only worth something because people think it is. It isn't actually much good for many practical purposes. And it doesn't give you any interest or dividend. It just sits there, waiting for someone to steal it. (Like when the US government made it illegal for a private citizen to own more than a tiny amount of gold - ten years in prison for that one.)

Buy art

It's the same as gold, although it has never been made illegal. Yet.

Buy stocks

The greatest mathematicians in the world have put their minds to this, and the best they can figure out is that stock prices take what they call a 'random walk'. So you could buy today, then suddenly stock prices take a random walk downhill. You might as well go into a casino and bet on red. So what about all the people who have made megabucks playing the stock market? Well they have just had a winning streak, like any gambler might have. You never hear about the losers.

But what about those great economists who can explain every detail of every financial event in history? Fine. But they don't know squat about the future. If they did, they would cash in.

Invest in a hedge fund

Oh now you're kidding. You're going to give your money to someone else to invest on your behalf? They'll take a 2% management fee on every dollar your investment is worth, and 20% of any profit. And if the value of the fund falls, it's your loss, not theirs. They are gambling with your money and by the rules of the game they always win.

Pay into a pension

Look up Ponzi scheme on Wikipedia. State pensions are giant, government-approved Ponzi schemes. You are relying on people, some of whom haven't been born yet, to continue to put money into the scheme so you can receive regular payments when you retire. If they stop putting in, well all the money that you put in has been given out to people who have retired already. There's nothing left and the scheme will collapse when the manure hits the rotating ventilation system. Governments can only get money through taxation or borrowing and one day people may take a stand and say enough.

Oh, you're paying into a pension from a private company so all is OK? Rest assured that the 100 biggest corporate plans in the US were only $303 billion in deficit in January 2015 (most recent figures since last article update). And I remember asking that smartly-dressed guy who came round to my house if his company, one of the largest pensions providers in the UK, could ever go bust? He assured me that it was absolutely impossible. Equitable Life.

Give it to charity

It will make you feel noble, so maybe that's worthwhile. However, you probably know how engineering designs are tested, tested and tested again before being put into practice. New drugs have to be put through rigorous clinical trials before they can be licensed. Charities have no such checks. You give the money, the charities spend it. No-one checks to see if the money does any good to anyone. If you want to give, read this book first.

Make out a will to give it to your kids

Yeah, and take away any incentive they might have had to achieve anything in life. They will only squander it.

Develop a drug habit

With any luck you might be dead before your career takes a nosedive. Your reputation will be preserved forever!

Burn it

Though technically this might be illegal, don't worry - the government can always print more, and the banks can conjure it out of thin air! You could always film the bonfire for posterity.

And after all that...

Spend, spend, spend!!

Really, it's the only logical conclusion!

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