How often have you heard of people that won a mega lottery, only to find themselves bankrupt? I have wondered how in the world you go bankrupt when you have a large sum of money, assuming you didn’t invest with Lehman Brothers.
The New York Times wrote a story this week about Nick Martin, who owned a portion of the family business, Martin Media. Martin Media was sold in 1998 for $600,000,000, which was distributed amongst the owners. The man featured in the article received $14,000,000 dollars ($10,000,000 after taxes) from the sale, which occurred in 1998. What did he do with the money? Bought fancy cars, houses, horses, and probably a ton more that was not listed.
So, guess where Martin is now? He rents a $900/month tract house, drives an 11 year old truck, and is struggling to get by.
How can that happen? How can you go from being incredibly affluent to renting a small home and struggling to find work? Martin himself has said he is ‘basically broke’. From his perspective, their is plenty of blame to go around. Conventional investing methods didn’t work out for him (real estate and stock), he got a lot of bad advice, and he felt he should have kept working and invested more in bonds.
Well, I do know that when someone ‘hits the jackpot’, there are tons of vultures out there just waiting to take advantage. I have no idea who advised him to do what he did, but I am not surprised that he may have been led astray partially. However, if you have ten million dollars free and clear, you wouldn’t have to work ever again or invest in one stock if you used some common sense. If Martin had just put that lump sum in ‘safer’, secured investment vehicles making only 3 percent, he would have cleared $300,000 a year. That would have been plenty to live off of, whether he worked or not.
I also found it interesting that Martin felt he was ‘ripped off’ by only getting $14,000,000 from the sale of the company. He was a minority shareholder, but I have no idea if the deal he got was fair or not. However, would it have really mattered? From the way his family was spending, I don’t know that fifty million would have been enough. If you can’t get by on ten million dollars, then something is very, very wrong, and more money is probably not the answer. (He would have been better off to learn ways to transfer money to an offshore account or some other place where he would not have had such easy access to his money.)
I recognize hindsight is always 20/20. However, Martin’s story is not a unique one. Many people just do not know how to handle money. Why else is the idea of stimulus checks so popular? Not because politicians think Americans will put the money in the bank for retirement; they know that many Americans will run right out the door and SPEND. Again, our country needs a total overhaul in financial education starting in middle school, and parents need to set better examples for their kids.
Can you understand how someone can blow through millions of dollars and be left with absolutely nothing to show for it? If it comes out in the news that Martin received a bailout for his bad real estate investments, I may just go insane.