MC Hammer is a true rags to riches to rags story.  By the peak of his career he had earned almost $70 Million and managed to blow through approximately  $73 million (in today’s dollar) in just five years, through lavish spending and mismanagement.

Luckily, his story has been well documented so we do not have to repeat the mistakes he made.

If he had the chance to do it all over again, and I had somehow inveigled myself into his close social circle, here is what I would recommend to him:

You have to know where your money is going. And if your money is going places that won’t benefit you, then create a plan to make sure you get the best bang out of your bucks.  And then start doing it!

The best way to create an action plan for your money is to establish a budget and stick to it.  But you have to be realistic and honest when setting your budget.  Make sure to include a healthy portion for the things you really like or it will be like going on a crash diet.

So if MC Hammer had created a budget, he would have realised that even if he had earnings of $50 Million  over 4 years, a monthly expenditure of $500K , along with large capital expenditures for 17 luxury cars, 21 race horses, a private jet and a mansion, was not sustainable.

Do you know the exact dollar amount of your total debt?  You probably would not be surprised that many people do not know this number.  But the old adage “what gets measured, gets managed” is true every time.

Start by listing all of your debt:

• • Credit Card debt
  • Car Loans
  • Mortgage loans
  • Children’s school and university expenses

If you have a clear picture of what you owe, then planning for it becomes a bit easier.  Remember that the most expensive debt, such as credit card debt, should be repaid first.

There is a little rule of expenditure that can help you allocate where your funds should be going:

This is the best way out of the constant financial struggle you may be finding yourself in.

The only really effective way to build wealth as a salaried person is to start investing and make investing a habit.  Part of that 20% of your net income you identified previously should go toward creating a customised, unique investment portfolio that is just right for you.

Investing is for the long haul.  Just as you have spent 30 years paying off for your house, you need to allow several years for your investment portfolio to create a wealthy you.

Creating wealth is a deliberate act based on a consistent and committed set of actions over time.  Just like building a house.  Or paying off your mortgage. Or getting  your bachelor’s degree.  Or parenting your child.

The key is consistency, planning, deliberate action and drive.

You can do it.  You do not have to be like MC Hammer.

Creating wealth is not magic.  It is not an avenue reserved for the rich, or the risk taker, or the truly lucky people. 

Creating wealth is possible for every single person on this earth.