A reader sent me an email about this NY Times article Family's Fall from Affluence Is Swift and Hard
Its in the similar category of the Downsized TV show that I've been following. I have episode #4 of Downsized waiting for me to watch it on the DVR at home.
The NYT article is about the Martin family. They had a large windfall twelve years ago and are now "broke" (more or less). To me this story doesn't seem to really have too much to do with the recession and housing bust. Mostly this is a story of a family that wasted a giant windfall by buying tons of stuff with apparently no real plan to support their lifestyle.
They got $14 million from their interest in the sale of a family business. After taxes they had $10 million left.
Here is a list of the things they bought with the dollar costs when known:
A house in England = ? $ unknown
1 horse = $173,000
2 other horses = $?
Mink coat = $7000
3.5 acres in Adirondack on Tupper lake = $250,000
House in Vermont = $650,000
More money in Vermont property = $600,000
Building / remodeling of lake property = $5,300,000
Aston Martin car $395,000
Total amount spent accounted for $7,375,000
Not only that but they also apparently had mortgages of at least $1.1 million.
It seems kind of obvious to me that if you have $10 million that you shouldn't spend most of it on 'stuff' without having a significant means of supporting yourself.
I wonder how they thought they would support themselves if they spent all their millions? They do talk that the husband wrote a novel which failed to sell. So maybe they figured he'd have a lucrative writing career. But they also mention him facing "margin calls" since he was tapping a credit line using his investments as collateral. I'm guessing he had money in stocks and assumed he'd make enough off those to support their lifestyle.
To their credit they don't seem to be making excuses. Martin says "We spent too much". And they have found work for relatively low paying jobs. So its not as if they're just sitting in their lazy boy whining about how the world abused them. Maybe they did have a realistic plan that would have worked out financially. The article doesn't really talk about how they intended to fund their living. But given how much they spent I don't see how they could have really fueled their lifestyle for very long.
December 2, 2010
How Not To Handle a Windfall
December 1, 2010
FREE - Different Holiday MP3 Music Download Daily All December
Amazon has more free MP3 music. Right now they have a 25 Days of Free
25 Days of Free
They started today Dec. 1st and the first song is White Winter Hymnal Each day through there will be another new free MP3.
Updown Performance : November +0%
My Updown account was unchanged in October 2010 but the S&P 500 was up a little bit at +0.4%.
So far in 2010 I'm still up 15.3% while the S&P 500 is up 6.4%. I'm now beating the index by 8.8% so far this year
Since starting Updown in March 2008 I'm up 18.9% while the S&P 500 is down 10.7%. My annualized return is 7.3%.
I made several trades in November.
I sold off my INTC at $20.99. I had paid $17.96 at the end of August. So thats about $3 increase and 17% profit in just over 2 months.
I also cashed in some profits on several holdings. I sold CVX at $82.89, CTL at $41.62 and some more at $42.74, KO at $63.97 and WIN at $13.20.
I bought GM at $34.16. This is a short term speculative purchase and I intend to sell it once it goes up 10%.
Just a reminder: Updown is just a game. I use it to play around with stock picking strategies. I wouldn't want to test out strategies with real money. If something works pretty well in Updown then I might try it out in real life but chances are I won't.
Net Worth Update : November 2010 : -$630
I track my net worth monthly on NetworthIQ.
Our net worth at the end of November was $648,289. Thats down $630 compared to October.
There weren't any major changes in our finances. Our cash balances grew a little, my stock assets increased a bit, our retirement was up a small amount and we continued to pay down our mortgages. On the negative side, the value of our real estate dropped.
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