Raise your hand if you’ve ever had the following thought: “If I could just win the lottery/write a best-selling book/make it on The Voice/turn that amazing idea into a business, I’d be rich!” Even the most levelheaded among us engage in the occasional money dreams, fantasizing about what it would be like to not have to worry about a student loan, a mortgage, or having to get up and go to work every morning.
Most people realize that money dreams are just that – dreams. But wishful financial thinking can be harmful if you let it cloud your judgment and stand in the way of making good choices in the here and now. In some cases, financial fantasies cross the line into financial “magical thinking,” or the belief that if you wish or hope for something enough, it will come true.
“[M]agical thinking results in an unfounded optimism about the future and thus causes people to make poor choices today because of that unfounded optimism,” personal finance blogger Trent Hamm wrote in an article for Lifehacker. “While it’s fine to have positive visions about the future, it’s incredibly dangerous to take actions in your life under the assumption that those positive visions are a foregone conclusion.”
In other words, the odd daydream about being blessed with sudden riches is fairly harmless, but pinning all your financial hopes on a fantasy is likely to end in disappointment at best, and financial ruin at worst. If you’re hoping one of these five money dreams is going to come true for you, it’s time to readjust your expectations.
1. Winning the lottery
We’re not saying it’s impossible to win the lottery. A handful of people do occasionally take home big jackpots, and smaller payouts are even more common. But if your long-term financial plan consists of playing the Powerball and buying scratch-off tickets, you’re unlikely to get rich. The odds of picking all the winning numbers on a Powerball drawing are 1 in 292.2 million. Even your chances of winning a smaller prize aren’t great. The odds you’ll match four numbers and win $100 is 1 in 36,525 – and a hundred bucks isn’t exactly quit-your-job money. You’re more likely to be struck by lightning than to become a lottery millionaire overnight.
Dreaming about other types of financial windfalls isn’t usually very productive either. The chances of a long-lost relative leaving you a fortune are slim, as are the odds of Publishers Clearinghouse showing up at your front door.
2. Picking the next Apple
If you’d bought $990 worth of Apple stock back in 1980, when the company made its initial public offering (IPO), you’d have about $300,000 today, according to Investopedia. That’s a tidy sum, and numbers like that can tempt people to spend time trying to chase down the next Apple for their own portfolios. Yet making fast money in the stock market by buying up shares of a future hot stock while they’re still cheap is next to impossible for the average person. Few average Joe investors have the knowledge to select the stocks that will appreciate wildly and then hold on to them for the right amount of time.
“For 99.99% of us, chasing after the Googles and the Apples of the world will lead to the investing version of dating rejection,” financial planner Carl Richards wrote in the New York Times. The odds of success are slim, and the chances of losing money are high. Most won’t be able to stomach the risk. (Ask yourself: Would you have stuck with Apple when the company was in the doldrums in the mid-90s?) As Richards put it: “[D]o you really want to toss a coin and make such a big bet on the next big thing?”
3. Becoming an IPO millionaire
When Facebook went public in 2012, a few lucky employees were suddenly very rich. After the company’s IPO, mansions and luxury cars were “flying off local shelves,” Fox Business claimed, as newly minted millionaires went on a spending spree. For anyone who’s ever been offered stock options as part of a compensation plan, stories like that are enough to get you dreaming about your own private island.
Don’t start counting your stock market chickens before they’re hatched, though. Even if your company goes public and the stock initially soars, the good times don’t always last. Paper millionaires may see their wealth vanish, especially since employees often can’t sell their shares until some time after the IPO – and after prices have fallen. “People on average overestimate what they are going to make by about 10X,” Chris Zaharias, who’s had a 20-year career in startups and volunteers to advise employees about their equity rights, told Bloomberg.
4. Marrying rich
We hate to break it to you, but this is 2016, not 1816, and you’re not a character in a Jane Austen novel. Sinking your energy into trying to snag a wealthy spouse is not a viable financial plan. Yes, some people are lucky enough to end up married to someone who is well off, but as a financial strategy, it stinks. Even if you do marry someone who is successful, you need to also take steps to secure your own financial independence so you can survive outside of a relationship.
“Being dependent on someone else financially is not a positive thing, and sometimes it just happens to be that way, but seeking it out is a mistake,” a woman who’d married a wealthy man only to find herself in reduced financial circumstances after a divorce, told The Financial Diet. “There is a difference between building a relationship on mutual respect and then deciding, for whatever reason, that one of you should not work, and seeking out a relationship where you’re taken care of. Because even if it does work out for a while, you will be trapped.”
5. Starting a business that will make you a billionaire
Shows like Shark Tank have popularized the idea that almost anyone can be a successful entrepreneur, provided you have a great idea and a little chutzpah. But people who see starting a business as a way to get rich quick are in for a bumpy ride. For every Jeff Bezos — who started Amazon in his garage and turned it into the biggest online retailer in the country – there are thousands of people who sank time and money into ventures that failed.
“The breakout successes in small business are more like freaks of nature than reality,” Matthrew Toren, co-founder of Young Entrepreneur, wrote in Entrepreneur. “People hoping to retire early or land a million-dollar mansion may be in for a rude awakening when they realize getting struck by lighting is a more likely outcome. Often, running a startup ends up being more like a 9 to 5 job, except you are working longer hours, have higher stress levels and more responsibility than you’d experience by taking the safe, corporate route.”
That’s not to say you shouldn’t start your own business, or that you won’t be successful if you do. But it’s not an easy road to walk, and even if you make it, the chances you’ll end up as rich as Mark Cuban or Richard Branson aren’t great.
More from Money & Career Cheat Sheet:
- Money Problems: 5 Signs You’re Not Ready to Retire
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- 11 Jobs That Will Probably Survive the Next Recession