Inquiring minds are upon the Adirondacks tonight as the NYTimes reports on an incredibly sad but all too often story these days of a family who lost its fortune. They pretty much had it all:
…the life that Mr. Martin and his family enjoyed until recently at their Adirondacks waterfront camp at Tupper Lake, N.Y. Their garage held three stylish cars, including a yellow Aston Martin; they owned three horses, one that cost $173,000; and Mr. Martin treated his wife, Kate, to a birthday weekend at the Waldorf-Astoria, with dinner at the “21” Club and a $7,000 mink coat.
That luxurious world was fueled by a check Mr. Martin received in 1998 for $14 million, his share of the $600 million sale of Martin Media, an outdoor advertising business begun by his father in California in the 1950s. After taxes, he kept about $10 million.
And it’s much different now:
Nick Martin teaches grape growing and winemaking each Saturday to a class of seven students in a simple metal building here at a satellite campus of Highland Community College.
… he drives 14 miles in an 11-year-old Ford Explorer to a sparsely furnished tract house that he rents for $900 a month on a dead-end street in McFarland [Kansas], a smaller town. Just across the backyard is a shed that a neighbor uses to make cartridges for shooting the prairie dogs that infest the adjacent fields.
It is an old story…the offspring of a successful businessman cashes out to gain the riches contained in the family business and the money slipps through their fingers faster than they ever imagined. Poor financial decisions on top of the pounding recession pummeled the value of their real estate and new financial investments, rendering their properties unaffordable.
The bad financial decisions? Just click on the link. It is astounding the poor decisions. The biggest mistake was that the family thought $10 million is enough for a family to live an extravegant lifestyle. It is a common mistake.
$10 million equals $500,000 per year if you make 5% on the fortune. Yes, a great annual income. But way short of what is needed to not worry about what is spent. And if the family (which usually happens) spends large sums right away, then the annual salary decreases quickly. Spend $1 million (nice house, luxury car, sports car) and now you are down to $450,000 per year.
To see how a bad financial year can hurt this scenario please click on this link for the graph:
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