I follow sports more than most people, but less than some. One of the most fascinating areas of sport for me is how quickly professional athletes can burn through their fortunes – and end up completely broke after their careers are over.
With most professional athletes, a five year career is all they get. Imagine yourself after you graduated high school or college and knowing up front that your best earning years are coming up. Wouldn’t you be putting something away for the future rather then spending that dough on assets that are devalued the second you buy them, such as bouncy cars and jewelry?
Unfortunately, many, many professional athletes do nothing of the sort – instead they get involved with extra-marital affairs (talk about expensive), purchase enormous houses that are fully staffed, have fleets of expensive vehicles, boxes of jewelry, closets full of the finest clothing and shoes, boats, and on and on.
I don’t feel sorry for these people one bit, but am amazed that the pattern gets repeated over and over into infinity.
But athletes aren’t the only seemingly stupid ones. This is an interesting story about a relatively normal dude that inherited $14mm (he got to keep $10mm after taxes).
Here is what stuck out at me right off the bat:
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.
All of these things are GARBAGE. The cars were worth half the value the second he drove them off the lot, the horse the same, and the dinner, hotel reservation, and coat are gone.
So professional athletes aren’t the only ones that make stupid choices when showered with a sudden windfall of money. It happens to all classes, all colors. People are just stupid, I guess.
I am not saying you should be a hermit and buy nothing to please you, but spending lavishly all over the world is an insane plan. In today’s world $10mm isn’t a ton of money. Just the stupid horse costing $173k ate up 1.7% of the inherited money right off the bat.
Here is why I am in such a tizzy over this pattern that I witness repeatedly.
When I have a problem with my car, I have to take it in. I know nothing about cars, most likely never will, so I have to pay someone else to do it. If you knew nothing about financial investing, why on earth wouldn’t you want to head RIGHT OVER to a financial advisor (getting an attorney wouldn’t be such a bad idea either with that sort of cash on hand) and PAY HIM OR HER to manage your money? It is painfully apparent to almost everyone that if you spend money at a breakneck pace on bad investments like cars, jewelry, horses and your stupid posse that you will RUN OUT OF MONEY.
It is almost like there is some sort of disconnect between people who inherit or earn large sums of money and the real world. And it seems like they don’t think the party will ever end. Sadly, I read over and over that the party does indeed end – and rather suddenly and in a shocking fashion for all involved.
Another sad side story to this is to imagine what all that wealth could have produced on the charity front. Then again, it is likely that any economic activity would have been more beneficial to society than the quick and ruthless consumption of massive amounts of money on assets that are devalued by over half or more the second they are purchased.
Cross posted at LITGM.