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Getting $10,000,000 and Losing It All. Proof Money Does Not Always Buy Happiness

December 1, 2010 · 45 comments

in Personal Finance

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.

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{ 41 comments… read them below or add one }

First Gen American December 1, 2010 at 6:19 am

I think with that kind of money, I’d be worried more about protecting principal than growing my balance. I’d probably still do some stocks, but not more than 50%. Wow..1998 was before the housing bubble. If he bought a sweet pad, he would have been able to make a nice profit off it it.

I honestly can’t see myself ever needing money if I won the lottery or such thing. I think this guy probably never had to deal with money in his life and had no idea what he was doing or how easy it is to lose.

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Kris December 1, 2010 at 9:24 am

I thought about that too, 1998 was awhile ago, so it obviously isn’t just the economy.

What else struck me is that he was not a young man that just went wild with money. He should have known better!

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Moneycone December 1, 2010 at 8:09 am

I read abou this – not surprised. The same reason why most lottery winners go broke.

If I drive a small car all the time and suddenly upgrade to a Hummer, I still mentally know the size of my vehicle when changing lanes or negotiating turns. People who are not wealthy but come across a large sum of money, unfortunately, don’t know the size of their wealth and spend like there is no tomorrow.

10 Million is not unlimited money!
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The Financial Blogger December 1, 2010 at 9:19 am

I very much agree with your analogy. Things get bigger but most of the tools stay the same. Wise investments would have made him live mostly on the interests and never miss money for the rest of his life. Was he wrongly advised or was he not making the right choices? Big differences, often same results…
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Kris December 1, 2010 at 9:28 am

Fb – I think it was a combination of both, to a degree. I don’t think anyone would ever say that spending hundreds of thousands on horses is a good idea. (Unless you are in the ‘horse business’ and know what you are doing.)

I am sure he was happier before the business was ever sold than he is now.

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Kris December 1, 2010 at 9:26 am

Well, ten million could be unlimited money, if managed properly. I am not saying some of it shouldn’t have been enjoyed, but there was plenty of money to live off of in a risk-free manner. I get mad if I buy a bad stock once in awhile, I can’t imagine how I would stand it if I lost such a large sum.

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Nicole December 1, 2010 at 8:26 am

I have plans for that 10 million already.
1 million to buy a 2 br free and clear in the SF bay area.
9 million put in safe-ish investments (some completely safe, some in index funds) to live off of, pulling down no more than 200K/year (in the beginning hopefully much less)
Enjoy life quietly. Hike a lot.

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Kris December 1, 2010 at 9:31 am

I like that plan, although I would also be traveling a bit too!

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Nicole December 1, 2010 at 11:30 am

We might do a 3 br instead… And of course we’d travel to visit family and to see things. You can do a reasonable amount of travel on less than 200K/year. :)
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Kris December 1, 2010 at 11:40 pm

I think you gotta go with the 3 bedroom. You will never regret that extra bedroom. Plus, you are rich! (Assuming you don’t buy horses and a bunch of bad real estate.)

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The Biz of Life December 1, 2010 at 8:42 am

Sadly, people and governments go broke all the time spending like they have an endless supply of money. But $10M today isn’t enough to spend like a drunken sailor for an entire lifetime. It should be enough to live on comfortably for the average person for an entire lifetime if they can hold their spending down to a couple hundred grand a year.
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Kris December 1, 2010 at 9:32 am

Very true Biz. If managed well, it could provide a nice, solid income for a lifetime.

Now I am going to have ‘Jimmy Cracked Corn’ in my head all day… (that is a reference to the ‘drunken sailor’ comment for those not familiar with the song.)

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Valerie December 1, 2010 at 9:26 am

Ah, these people don’t surprise me anymore, but they do depress me! How I could use those $10M better!! I would happily live off the interest.

Then again, I think the family requests would be difficult. You know, parents want house paid off or need a new car, nieces are going to college… I can just see familial guilt kicking in!
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Kris December 1, 2010 at 9:33 am

Valerie- I think in this situation, a lot of his family also made a lot of money off the deal too!

You would need to learn to say no, that is for sure.

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Money Reasons December 1, 2010 at 11:00 am

I think Ron White said it best “You can’t fix stupid”…

If I had 10 million, I wouldn’t be gambling it all on the stock market or other risky investments! That was just sheer crazy!

But then again, it might also be a matter of bad luck, and panicking.
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Kris December 1, 2010 at 11:41 pm

I would understand it so much more if this guy was young and fresh out of college. But he worked for many years and should have known better! Greed does awful things I guess.

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Squirrelers December 1, 2010 at 1:59 pm

I saw that same article and had retweeted it when I read it. I found it to be remarkable.

It seems like you almost have to go out of your way to lose that kind of money. With $10 million after taxes, it seems to be smart to protect that and guard it to the point that it’s one of your big overall priorities, like a job. Learn everything you can about how to protect that principal, get the right cash flow, and keep that cash flow for the future.

Why go off the deep end and do all kinds of exotic things? Makes sense to consider that a gift of protection for your financial future, and leave it at that. Their decisions didn’t seem to be made with that mindset at all.

Now, they may have had some bad luck in there too – this happens. It’s when bad decisions join with bad luck/timing, then there can be disasters like this.

If I had $10 million drop in my lap, I would probably save $9.95 million of it. Maybe $50,000 would be spent on some things to make my life easy, and importantly on any legal/financial advice and protection. Wouldn’t it be great to have such a problem?
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Kris December 1, 2010 at 11:44 pm

You are right Squirrel, you would have to work hard to lose that much money. It reminds me of one of the shows about Michael Jackson where he just walked through this one ‘home’ store and he just kept pointing at all these expensive items and said ‘I want that, I want that…’. If you spent like that, I guess I can see where 10 mill may not go real far. But ‘things’ is the last thing I want.

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Crystal @ BFS December 1, 2010 at 4:56 pm

I’m never surprised by these articles, but I do feel a sense of loss for some reason…like so many opportunities flying away…ick. $5 million or more and my husband and I would be financially independent for life!

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Kris December 1, 2010 at 11:45 pm

I actually was surprised by this article for some reason. I guess I should know better.

I am with you. 5 million would be fine for me too.

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101 Centavos December 1, 2010 at 6:54 pm

Whenever I read these kinds of stories, I always think that as the money dwindles down, at some point you’ve got to step back and say, OK, that’s good. Down to the last million, time to stop.
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Kris December 1, 2010 at 11:48 pm

Oh I know! It is kind of like riding a stock down to almost nothing. You keep thinking those investments are going to bounce back. I think he thought the real estate market would start to rebound. Plus, he just spent on way to many ridiculous things.

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Aloysa December 1, 2010 at 8:24 pm

I am not surprised. Somehow majority of people who get millions of dollars blow it all in a matter of years. Sometimes I think what I would do if I’d get 10MM… Probably get a small house somewhere in the mountains, write, blog and travel. Nothing extravagant. And I would just put $ in savings account and try to live off interest. That’s it…
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Kris December 1, 2010 at 11:50 pm

Oh Aloysa, the picture you painted sounds so wonderful. Can I visit your mountain home? I will be near the beach…

There is a great fiction book written by David Baldacci called ‘The Winner’ that is based on the premise of bankrupt lottery winners. You an read that in your mountain home.

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Ken @ Spruce Up Your Finances December 1, 2010 at 9:16 pm

This is not different to some people who won the lottery jackpot. It is very easy to blow a huge amount of money in a short period of time if they do not know how to handle it. We’ve also seen a few celebrities like MC Hammer and basketball star Antoine Walker who filed for bankruptcy after making tons of money in their careers.

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Kris December 1, 2010 at 11:53 pm

You do see this to a lot of sports stars. I justify their bankruptcies a little more because they are all caught up in stardom and didn’t live in the ‘real’ world during their adult lives.

This guy had a real job and a real family. It is just surprising that he could fall so far to me. I know a lot of people go bankrupt after winning the lottery, but I think a lot of those people never seem to have much ‘financial’ experience. However, I guess I figured this guy did since he is/was a businessman.

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Kevin@InvestItWisely December 1, 2010 at 11:16 pm

Martin would have been fine even with a 100% stock allocation and a 3% withdrawal rate. The problem here was the spending. Unfortunately, many people especially mishandle money when they receive a windfall of it. The fact that there are vultures in the wings doesn’t help.

I remember when Google was doing their IPO, they brought in financial experts to help educate their employees, and they basically told all of the vultures to get lost. Unfortunately not everyone is as lucky to get the same guidance.
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Kris December 1, 2010 at 11:56 pm

Martin would have been better off putting the cash in a pillowcase! :) But you are right, he would have been fine even in the stock market. He would have bought before the tech bubble too. (Hard to dollar cost average 10 million though! :) )

Your Winter Wonderland post inspired me to put a snowman up for my RSS feed!

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Invest It Wisely December 2, 2010 at 10:07 am

Really? That’s so cool, haha. I have not looked at an RSS feed in almost a week. I have about 800 unread items in there, so not looking forward to it either… maybe on the weekend!
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Kris December 2, 2010 at 10:56 am

I think you should still sign up for my RSS feed so you can then have 801 (or more) to read.

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Invest It Wisely December 2, 2010 at 11:01 am

Haha. I’m already signed up, but I already visit you every day anyways ;)
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Roshawn @ Watson Inc December 3, 2010 at 8:31 am

Yikes, it is so easy to get behind on my favorite sites… my apologies. Anyway, I saw this article the day before you posted it and also considered writing about it today (changed my mind though). I think he is a perfect example of how the amount of money really is of little consequence. If you are a poor money manager and live long enough, your money WILL evaporate. It will seem natural. You will have all sorts of excuses, and none of them will acknowledge where the blame truly should rest.
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Kris December 4, 2010 at 10:43 pm

Shawn, no apologies necessary – life is busy!!

Money really doesn’t matter once you have a certain level of comfort and can accept it. I truly think a lot of people spend to ‘comfort’ themselves, and then is like covering a hole in a dam with your finger in my opinion.

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Get Happy Life December 4, 2010 at 4:50 am

I disagree with you, Money Reasons, about money bringing happiness! Wasn’t Martin happy when he got the money? The relief and excitement he got?

Moreover, wouldn’t money bring happiness to those who are really poor? Hungry people in Africa, for example?

There is a limit up to which money increases personal level of happiness, and it is saturated after reaching about $200.000 a year.
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Kris December 4, 2010 at 10:37 pm

GHL – Well, I don’t know that you can put a ceiling on what amount of money would ensure happiness. Some articles say 75k, you just said 200k. It all depends on circumstances.

Was he happy? I don’t know. He was actually unhappy because he felt he didn’t get his fair share. Did his first luxury car provide happiness? I don’t know because he obviously wasn’t satisfied with just one. Was three enough? Who knows. They kept spending and spending, and then all hell broke loose. My point was, you would think that 10 million would make anyone happy and content. In this case, it cause a lot of family discourse and resulted in them being broke. That does not seem happy to me.

Money is not the answer to everything. Sure the poor would love money, but many who are poor and win the lottery end up right where they started. You can’t just buy things to satisfy fill holes in your life. You mention the hungry in Africa. Money absolutely would make them happy and I am sure they are horrified by the excesses in America. However, money may not buy them health or whatever their situation brings them.

Give me health, love, money, and the ability to manage money, and then I think I will be pretty darn happy, but who knows.

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Eve December 4, 2010 at 10:05 am

No offense, but the title is an epic fail! How can this article prove that money doesn’t buy happiness? I agree, money cannot buy happiness, but this is totally not the way to prove it.

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Kris December 4, 2010 at 10:30 pm

Eve, I agree that just based on the post you may not see the ‘unhappiness’. However, from the article that is linked in the post, you can see all the problems that came with the money. Given, I guess a lot of the problems came from the mismanagement of money. However, his wife’s decisions to buy horses caused issues between them, as did his decisions on real estate. Bottom line is, in this example, you would think that ten million dollars would bring a family happiness, comfort, etc. Unfortunately, it brought greed and a host of bad decisions.

I appreciate your visit.

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Jim December 6, 2010 at 6:32 am

SO true – its not how much you have its how much you spend that counts. I gathered a couple of “hard Luck” stories at this post http://www.uhnw.com.au/2010/12/how-to-deal-with-10-million-what-would-you-do-if-you-won-the-lotto/.

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Gustav Skurdal February 22, 2011 at 2:41 pm

People are taught from youth to want the world, to be like or better than the neighbors, to want wealth. Most, however, are never taught how to actually deal with wealth, how to invest, to be spend thrift, or what to do if, or ever, they receive a large sum of funds. As result, most people that win large money from PCH, lotteries, etc, go out to fit in and make friends through spending, and that is what they do, spend. Fancy cars, big houses, house maids, boats, giving gifts to others to befriend, showing off in nightclubs by buying for all, or ordering rounds for the house. Such spending doesn’t take long to go through funds. And, unless they have learned money management, or have a financial advisor, they do not keep track of their money because they believe that false tale, “you can live forever off a million dollars” when in truth you cannot unless you invest properly.

Most people obtaining these type winnings lack knowledge how to invest, and they do not go to professional investment brokers, but usually probably obtain their advise from some friend, or a friend of a friend, that got lucky once and now holds all wisdom how to invest, only to mislead the person into a losing proposition. People need schooling and training, staring from youth. If youth were allowed to work in the schools, like building homes to help the school, for example, and each student receiving a small portion of the sales, to be used for investment and fund management, people would have much better knowledge how to spend money, but thei will probably never occur without parents seeking legislation for such. So, like majority of those winning large sums of money, the average is for $10,000,000 to be broke after five years or so because of not knowing how to invest or manage the funds. Even a business would help, however, most people winning such funds feel they can retire, only to lose years of work experience that hinders them when they have to return to the work force. It will continue until people are taught from a young age how to handle money.

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Jennifer Brown October 23, 2014 at 6:20 pm

For someone money brings happiness. I’m sure that every person who has money is happy. I’m not happy because I don’t have money. I have a lot of financial difficulties in which bad credit personal loan helps me. Small loans can be good helpers in any situation. Of course these small don’t make me happy but they help me not to be miserable.

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