On Thanksgiving, the New York Times published a story about a man who had a check for $14 million ten years ago — $10 million after taxes — and who now has little to his name (Nick Martin). It’s not the sort of uplifting, family-focused feature article you usually see around the holidays, but people do seem to enjoy reading about the misfortune (quite literally, in this case) of others.
During the holidays, I was able to forget about money for a little while, but returning to “real life” after a vacation means I have to get down to business. For me, that means doubling my writing efforts and managing Consumerism Commentary better and stronger. Back to the series of Nick Martin’s unfortunate events.
In 1998, Nick received a check for his portion of the proceeds from the sale of his family’s billboard company. The urge to spend took hold, resulting in cars, houses, and horses. To keep his new purchases in good condition, he needed cash flow, something that was significantly lacking, particularly as real estate investments and the stock market crashed.
It’s easy to be judgmental. The internet is a place where armchair quarterbacks feel comfortable. Very few people know what would happen if the same situation — an unexpected windfall — occurs to them. There’s enough blame to go around. Here is Mr. Martin’s perspective:
He is furious at the banks and the bankers, who he thinks gave him bad advice, and he still sounds angry at his brother and others who decided to sell the company and who he says gave him little voice. Some of them got more than $100 million each, he said, while he got $14 million, as did his father and his sister Ann, because they were all minority shareholders.
In any similar situation, we see bankers who give advice with their own financial gain in mind rather than fiduciary responsibilities, individuals who trust a limited number of professional opinions, and the temptation to spend. Placing blame isn’t really important.
We can play games of hypothetical situations, asking each other, “What would you do if you inherited $10 million?”. When we can separate ourselves from the situation, it’s easy to think rationally. Here is what one might consider if they took the opportunity to envision receiving such a lump sum ahead of time.
- Invest conservatively to ensure a cash flow and live off the income.
- Have a low-stress job to boost that income.
- Invest a small portion in the stock market for a chance to grow wealth without risking too much of the balance.
- Possibly start a foundation, passionately supporting a cause.
These are all rational choices. Unfortunately, rationality is often the first thing to go once that check is in hand. In general, financial decisions are rarely rational even when not involving windfalls because humans are generally irrational, favoring emotional decisions. It is quite unfortunate that a descent like Nick Martin’s can occur, but losing a great deal or having a windfall slip through your fingers can be a good reminder that these is more to life than your net worth.
Updated January 3, 2011 and originally published November 29, 2010.