How Easy is it to Lose $10 Million?

Very easy.

I am sure we have all dreamed about a windfall, all the things we would do with said windfall….

Take care of family, pay off the mortgage, set up college funds for the kids (or grandkids), buy a Mini station wagon, give money to good causes, go on a big trip, spending the equivalent of the GDP of a small country on shoes….

Okay, maybe not the last one but you get the drift.

But big dreams not grounded in some semblance of reality can lead to a big bust.

We’ve all heard the stories about people who come into obscene amounts of money only to find themselves in serious debt within a matter of years.

How does that happen?

Those of us who believe ourselves to be infinitely smarter (but apparently not very lucky) shake our holier-than-thou heads because we would never let ourselves be caught in this situation. Would we?

As much of a head scratcher as it may seem, much of it may have to do with the fact that people who never had money don’t know what to do when a pile of it lands on their lap.

How many of us can really conceptualize what it means to have  tens or hundreds of thousands, let alone many millions?

Nick Martin never thought the 14 million dollar windfall (about 10 million after taxes) from the sale of the company his father started would be gone in 10 years. All it took was a few poorly timed real estate purchases (and renos), some investment missteps, a few extravagances that likely wouldn’t have put them over the edge but coupled with six-and-seven figure mistakes in other areas….

See money go poof.

It may be arrogant to think we would never allow that to happen- especially when most people don’t have a clue when it comes to money management. (Why else would those cheque cashing places be so popular?)

Seriously, how many people do you know live paycheque to paycheque? When I worked in Yorkville, I often felt like  the only person who had any concept of fiscal responsiblity- and I was probably among the lowest paid.

I was always told it didn’t matter how much you earned (though more is usually better) but how much you were left with at the end of the day. Sage advice for anyone wanting to get “ahead” but this was small comfort to me when (up until a few months ago) I was making slave wages (read: grossly underpaid).

But I digress.

I have read profiles in the paper of those couples earning more than$250K (collectively) who were drowning in debt.  It would blow my mind. The tendency for most people is to spend up to (and beyond) one’s salary- the bigger the paycheque, the bigger the toys.

And therein lies the problem. With a raise or bonus, you want to have a little fun. That is not a bad thing but some people don’t know when to stop or don’t consider how much they really have to play with after taxes. 

Compounding this is, of course, is the desire to make the Jones cry.

I occasionally feel the twinge to “keep up” but I smack myself down (before doing serious damage) by reviewing my big picture. Very few people (even those with multi-millions) can have everything all the time- how boring would that be?

I am careful but I strive for balance. My big goal is not having to rely on “the man”. Call it “retirement” or just financial independence but having that option preserves my sanity. Knowing that I could cut and run now (though it would put other goals on the backburner) is better than having a new car every two years or eating out in expensive restaurants four nights a week.

We can go from $100 to $10 000 000 just as easily as the other way- it is up to us.


~ by angryegg on December 2, 2010.

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