30 Weird Ways People Go Broke

In these financially precarious times, it seems easier than ever for one bad day or crippling financial event to leave someone completely broke. With the threat of recession looming, high tariffs increasing American cost of living across the board and the hangover of pandemic-era high inflation still lingering, the difference between a financial cushion and going broke could be a matter of one money emergency.

With that in mind, GOBankingRates compiled 30 ways a person could go broke, from the fairly typical (divorces, bad business partners) to the rare and rather surprising (winning the lottery, excessive plastic surgery). Creating a roadmap of the financial decisions to avoid — especially in unpredictable times such as these — could be just what you need to keep your finances safe.

Check out these valuable lessons and save yourself from financial ruin.

Some people who inherit money spend irrationally. They go on shopping sprees, take vacations and immediately start upgrading their lifestyles, ignoring smarter options such as investing the inheritance.

Jacob Wade, the founder of IHeartBudgets, spent $100,000 — consisting in part of money put aside for him following his father’s death — within three years when he was just 18. A tricked-out pickup, tuition money for an education he never completed, and a luxury car for his mom ate up a large chunk of his cash. Another $27,000 went toward living expenses after he took 18 months off work.

“I’ve seen people want to buy everything from yachts to mansions that are completely out of budget after receiving an inheritance,” said Elle Kaplan, CEO and founder of LexION Capital, a New York-based financial management firm. “There’s going to be a huge rush of emotions when you suddenly have money — but those are your worst enemy.”

Failing to separate rational thought from short-term choices is a great way to go broke.

Although hitting the jackpot is supposed to be the key to financial freedom, it doesn’t always lead to easy street or happiness.

Jack Whittaker, who died in June at age 72, made headlines in 2002 when he won a record-setting Powerball jackpot of $315 million that netted him $113.4 million after taxes, The New York Times reported.

Although he gave huge sums of money away, much of it through his foundation, the building contractor also poured money into his business ventures, and spent enormous sums drinking and gambling. Whether he had any money left when he died is unknown, but his personal life had taken tragic turns long before that.

“It’s incredibly strange and unfortunate that individuals who suddenly acquire enormous amounts of wealth would’ve been better off had they never gotten that winning ticket in the first place,” Kaplan said.

If you get a sizable lump sum of money, don’t become a banker or a lender, said Edwin Cruz, owner of Prosperity Financial Group in Palm Beach Gardens, Florida.

“I know a couple that was awarded a large sum of money in a settlement. The children and other family members had a lot of business ideas. None of those deals went well, and the couple went broke in about five years,” Cruz said. “Invest wisely, because money can disappear quickly.”

For some people, gambling is recreation. For others, it turns into a financially crushing addiction. It’s not unusual for gambling addicts to drain savings, raid business accounts, write bad checks or spend their child’s college tuition.

Even when it doesn’t lead to ruin, problem gambling can be enormously expensive. Take golfer John Daly, winner of two major championships, for example. Daly, who underwent surgery in 2020 for bladder cancer, estimated net losses — the amount remaining after deducting $35 million in gambling wins — to be about $55 million from 1991 to 2007, Forbes reported.

Many problem gamblers continue playing until they’re broke. The social cost of problems associated with gambling — including job loss, bankruptcy and divorce — is estimated to be $7 billion nationally each year, according to the National Council on Problem Gambling.

Many financially successful people go broke trying to get richer. They start businesses they don’t need, and don’t have the experience to run. Washington Post columnist Michelle Singletary once called it “entrepreneur syndrome.”

In a 2012 article, she cited Pro Football Hall of Fame inductee Warren Sapp as an example. Despite having earned nearly $60 million over the course of his 13-year NFL career, he retired from pro football in debt. His bankruptcy filing, submitted in March 2012, listed $6.7 million in debts. Sapp’s lawyer told the Tampa Bay Times that Sapp filed because of his business debts, although the lavish personal spending described in the filing undoubtedly contributed to his financial ruin.

In many cases, people go broke co-signing for a family member or a friend.

Michael Eckstein of Eckstein Tax Services in Huntington, New York, recalled one woman in her 20s who co-signed for her aunt’s loan. The aunt stopped paying, and her niece was left to pay the loan, plus interest. The niece had to pay to avoid ruining her credit at a young age.

Co-signing a loan might seem like a simple favor, but it can land you in some serious trouble, Eckstein said. For that reason, it’s best that you don’t co-sign for a loan.

One parent took out a loan to take her child to Disneyland with friends for the child’s seventh birthday, recalled Catherine Cooper of Catherine Cooper Insights. Another parent booked a weekend at a fancy hotel with room service to celebrate her child’s graduation from elementary school. Both parents put it all on their credit cards.

“A lot of single moms stick their necks out and do crazy things to give their kids whatever they want,” Cooper said. “But since kids don’t have an end to what they want, these women end up broke. These women are often driven by memories of their own deprived childhoods, so they overindulge their children [at] their own peril.”

Pyramid schemes are illegal operations that promise huge financial returns to those recruited into its shady scam. Victims are required to buy in to the operation, and then are required to recruit two or more participants who must also buy in. The money flows to the top of the scheme, as the entire operation is predicated not on earning money by selling goods or services, but simply by recruiting more and more people who buy in and are promised payments that never come.

Restaurant failures leave a lot of people broke, and owning an empty restaurant building makes the failure a greater financial disaster, according to Randy Tarpey, CPA and owner of the Pennsylvania accounting firm Sickler, Tarpey & Associates.

Tarpey told the story of a Pennsylvania police officer who bought a pizza restaurant for $450,000. He tried to run it with his family, but it failed. In addition to losing all his money, he had an empty building that didn’t sell until years later — and only for a fraction of the amount he had paid for it.

“I’ve seen this mistake repeated a lot over my career,” Tarpey said.

Investing in independent films is a gamble, and Tarpey said most people have lost in the instances he has encountered. In one case, there was a $10 million production in Philadelphia, and all the investors lost their money.

“It was a bunch of rich friends, then not-so-rich friends,” he said. “People who invest in independent films often believe in the movie and the production, but those people aren’t thinking about real channels for profitability.”

Author and entrepreneur William Seavey’s plan to build a straw-bale house in Washington ruined his finances. He acquired the property, had financing in place and was ready to construct it. However, building officials stepped in and put an end to the project, he described in a series of articles.

Seavey said he lost all the money he had put into the project and went broke. Fortunately, he eventually rebounded.

Heidi Montag, star of “The Hills,” at one point ended up broke and living in her in-laws’ house. Her financial vice? Excessive plastic surgery.

Montag had three procedures within the first year of the show airing, and later she underwent ten procedures in one day, according to The Daily Beast. Getting plastic surgery was among the ways she overspent and went broke.

A lot of people dream of making it big in the music business, and some make serious financial mistakes to pursue such goals. Again, “The Hills” co-stars Heidi and Spencer Pratt are examples of this mistake. Pratt told The Daily Beast that they spent nearly $2 million hiring big-name writers, producers and engineers for Montag’s pop music career, which didn’t take off.

Gifting houses to people who can’t afford them isn’t a good financial decision, said Randall Janis, host of “The Income Strategies Show” and founder and owner of Clear Income Strategies Group.

One former football player who appeared in the Super Bowl bought houses for his mother and father, plus his kids and friends. He also had several houses of his own. Once he left the NFL, there were all these properties in the possession of people who couldn’t maintain them, which left him with a serious financial dilemma.

“Just because you buy a house in full doesn’t mean you get to keep it. There’s property tax, upkeep and so forth, and somebody’s got to pay for it,” Janis said.

Endorsements are a huge source of income for many celebrities and athletes. No one understands the sting of losing one of these lucrative deals better than beauty vlogger and influencer Olivia Jade Giannulli, daughter of actress Lori Loughlin and designer Mossimo Giannulli.

Following her parents’ indictment for their alleged role in the college-admissions bribery scam in 2019, Olivia Jade lost lucrative deals with Sephora and Estée Lauder. A deal with TRESemmé also was rescinded. Her parents entered guilty pleas in connection with the case. Loughlin was sentenced to two months in prison and her husband to five months.

During a 2010 appearance on “The View,” boxer Mike Tyson said he was “totally destitute and broke.” This is a man who earned an estimated $400 in the boxing ring, lived in mansions and kept tigers as pets. When asked how the financial downfall happened, his reply was, “I had a lot of fun.”

A lot of people go broke because of their cars, Janis said. He told a story about one man who was driving a BMW with a payment of $913 per month, which he could barely afford. Add in money for gas and insurance, and he was paying about $1,600 a month for a car.

It was more important to the man than his house, so he downgraded where he lived to keep his car. In the end, that car destroyed his credit and left him broke because he couldn’t keep up both his lifestyle and the car, Janis said.

Most people, if forced to go to jail, aren’t just unable to earn their regular working wages, but they’re also unable to pay their bills — child support, student loans, car payments, rent and/or mortgages all go unpaid. Cars can get repossessed, you can get evicted from your home or apartment and liens can be placed upon whatever money you have left to collect your loan debt.

Treating credit cards like free money is another way people go broke, Cooper said.

Actress Mariska Hargitay has discussed openly the big debt she ran up during the years she struggled to find steady acting gigs. She eventually borrowed $60,000 from a boyfriend — all of which she repaid in full — to dig out from under her credit card debt.

Hargitay was fortunate to have support during her lean years. “A lot of people end up exhausted and file for bankruptcy,” Cooper said.

A MarketWatch article outlined the tale of an executive who had 12 properties valued at a combined $3 million in 2007. When the economy went south and her renters moved out, she didn’t have money to cover the mortgages, repairs and maintenance. She lost all but one property to foreclosure and short sales.

Getting lured into real estate without the proper experience or adequate capital can be a countdown to financial ruin.

In addition to being emotionally painful, divorce can also be financially ruinous\. Divorce can automatically reduce one’s household income level by at least half if not more, and one can lose even more if a divorcing spouse sues for assets, child support or other forms of remuneration.

Janis held a workshop in which one of the participants had a 15-person entourage. The participant paid for almost everything for the entourage, including living expenses, cars and vacations. In the end, he was paying for their friendship and when the money disappeared, they were gone, Janis said.

An entourage is a source of ridiculous spending, and it’s definitely one of the contributing factors to celebrities going broke, Janis said.

Rapper MC Hammer reportedly earned $33 million after the success of his 1990 album “Please Hammer, Don’t Hurt ‘Em,” according to The New York Times. But, he filed for Chapter 11 bankruptcy in 1996.

On the “Opie & Anthony Show,” Hammer said he went through the money “giving back to the community.” He was paying 200 employees at a cost of $500,000 a month. It was the crack era, violence was rampant and death was a regular thing in his neighborhood. So, he said he gave jobs to people in the community. Unfortunately, the strategy was unsustainable.

One of Janis’ financial workshop participants has an accountant who sends him $46,000 per month. The participant doesn’t know how much money he has in the bank, just that he achieved stardom and a $35 million contract. But if you do the math, he’ll spend almost $6 million in 10 years.

“The money’s going to run out because it’s not being handled correctly,” Janis said. “Always know what you have. You can’t assume someone somewhere is looking out for your best interest.”

In an ideal marriage, both spouses are open and honest about their spending. However, when one spouse hides debt from the other, things can spin out of control. The term for this behavior is financial infidelity.

Navicore Solutions, a nonprofit financial counseling agency in New Jersey, fielded a question on its website from a woman who began using credit cards to make ends meet after her husband lost his job. He was unaware that she’d been using the cards. By the time she reached out for assistance, she’d racked up $45,000 in credit card debt.

Financial infidelity imposes a double whammy. It’s as damaging to the couple’s relationship as it is to their finances.

All investments have risks, but if you invest in penny stocks, the risk level can be akin to gambling. Timothy Sykes is a seasoned trader who said he turned $12,415 into nearly $6 million. But even he admitted on his own website to losing his money roughly 30% of the time.

People who ignore the odds and stake money they cannot afford to lose — such as the mortgage or their savings — are destined to go broke. Penny stock investors should be prepared to lose their entire investment, the U.S. Securities and Exchange Commission has warned.

A bad business partner can be financially disastrous — a partner with access to joint finances can, through poor business decisions, wreck your credit rating, overspend your money and collapse your entire business plan. A poor business partner can leave you in debt or even bankruptcy.

People typically go to graduate school to further their careers, with the hopes of increasing their income. But graduate school can come with a hefty price tag, one the grad is often left paying off for many years.

Forbes reported the story of one woman who received a master’s degree in fine arts at the University of Southern California film school, but discovered that she couldn’t command the kind of salary in film that she would need to pay her student loan debt. She then decided to enroll at Pepperdine School of Law in hopes of earning more money as an attorney. However, in the years following graduation, she had more than $300,000 in student loan and other debt, and was struggling to get by on her entry-level law salary.

When it comes to choosing a graduate school, experts recommend keeping your total student loan debt at or below your anticipated first-year salary. Otherwise, you risk going broke.

One of the more common — and destructive — financial schemes out there is the inheritance scam. Often, victims are phished via email and told to transfer a few thousand dollars to cover transfer or banking fees with the promise they will be refunded and paid out a large family inheritance. Instead, their bank account is raided and they are left with nothing.

The ABC show “Extreme Makeover: Home Edition” took participants’ deteriorating, cramped houses and replaced them with beautiful, brand-new, super-sized homes to help them get a fresh start in life. These were the kind of success stories that offered some ray of hope in the midst of an economic downturn and recovery.

However, these new, larger and improved homes also came with higher costs — for upkeep, taxes and utilities, The Beaufort Gazette reported. The higher home value reportedly bumped one family’s tax bill from $750 to $2,500 per year. The electric bill for the new, larger home cost between $500 and $600 per month — up from $200. The family ultimately filed for bankruptcy.

There’s a lesson here for even modest renovations: Consider all potential costs when planning a home remodel or expansion. If you can’t cover the costs of keeping up your new home, you risk going broke.

Daria Uhlig contributed to the reporting for this article.