Instant Fortunes, and Sudden Headaches

By CAITLIN KELLY

Published: December 29, 2007 – The New York Times

So what would you do if you got your wish and suddenly came into a lot of money — by winning the lottery, perhaps, or getting a six-figure insurance settlement or a long-awaited inheritance? Financial freedom, right?

Ken Jennings, a 33-year-old former software engineer who earned more than $2.5 million by winning 74 consecutive games on “Jeopardy” in 2004, says it is not that simple.

“For a long time, I was paralyzed,” he said. “I didn’t know what to do. I was depositing a $1.5 million check into an account that had never had more than $5,000 in it.” What he did was quit his job. Eighteen months later, he moved his family from Salt Lake City to a larger home in the more expensive city of Seattle, bought a widescreen television and has become an author and developer of board games. Initially, he said, “it was a very lonely feeling. I was getting junk mail from all over the world and begging letters.”

He added: “For a lot of people, the money is the end. But that’s just the beginning. You need to decide what your goal is and stick to it.”

Laurel Touby, 44, an entrepreneur based in New York City, made her money last summer by selling mediabistro.com, a Web site for job-seeking media and creative professionals that she had founded in 1996. She sold it for $23 million — leaving $9 million to $11 million, she said, in her bank account after taxes. One of her concerns, she said, was losing friendships. “I’ve tried to be really direct, and I try to be really sensitive to their needs,” she said. “Otherwise you do have a separation and scare people off.”

Like Mr. Jennings, Ms. Touby and her husband, Jon Fine, a journalist, are feeling their way in an unfamiliar new world of money with little guidance.

“I had all kinds of illusions about how far the money would go and what I would enjoy, but they’re not true,” Ms. Touby said. “I thought, ‘O.K., a car and driver and a new apartment and a whole new life.’ In fact, I can only afford two out of three.”

She said she interviewed 20 wealthy people for advice and quickly found out about the deep divide between the truly wealthy — for whom private jets are the norm — and people in her new station.

Robert Frank, a columnist for The Wall Street Journal who wrote the book “Richistan: A Journey Through the American Wealth Boom and the Lives of the New Rich” (Crown, 2007), drew the same dividing line as Ms. Touby. From 1995 to 2003, the number of millionaire households more than doubled to more than eight million, he wrote in his book, with many of those households worth far more than $10 million.

For people who did not grow up wealthy, suddenly having to figure out how to conserve and build on a seven- or even eight-figure windfall is not easy. Nor is it easy to find smart, solid advice for handling it.

“If you have list of 10 things you think you’ll be able to do with all your money, you’ll only be able to do two,” Ms. Touby said. “There’s a knockdown period when the accountants tell you what’s really possible.” She remains determined to buy a Manhattan loft apartment, which will consume half her money, and must still earn $100,000 a year to maintain it, she said.

Elwood Bartlett, a 41-year-old accountant in Westminster, Md., won $84 million in a lottery last summer — $33 million after taxes. He gave away $200,000 to the Special Olympics while fending off hundreds of strangers pleading for his aid or investment.

“I went from being ‘Elwood Bartlett the individual’ to ‘the corporation’” he said. He incorporated himself to gain protection from a frivolous lawsuit. “Someone could see my face on TV and walk in front of my car,” he said.

Mr. Bartlett’s wealth has allowed him access to investments available only to those with $2 million to $5 million, like certain hedge funds. “I’ve bought a number of properties and I’ve made some opportunities for people,” he said. He has hired a full-time personal trainer, property manager and personal assistant, paying each an annual salary, with health benefits, of $30,000 to $60,000.

Mary Sue Donohue, a lawyer in Boca Raton, Fla., who has specialized in wills, trusts and estates for 25 years, advises caution. Many of the newly wealthy immediately want a larger house, she said. “It’s a pattern we regularly see, and it’s not a wise choice. It’s not necessary — they already have a place to live.”

Ms. Donohue advises clients to spend 5 to 10 percent at once, to have a little fun. “For anyone with a net worth of $250,000 or less, a windfall can be a real shock,” she said.

Patricia MacGregor, of Wellington, Fla., who has written 26 thrillers as T. J. MacGregor, used a $100,000 inheritance to pay down credit card debt and buy her daughter a used car. She put the rest into certificates of deposit earning 5 percent. Ms. MacGregor, whose husband, Rob MacGregor, is also an author, said the money “basically made life easier,” adding, “We have no steady income so if we have a slow year,” interest income on what is left can help pay the bills.

A windfall need not be six figures to make a difference. Janice Moore, for instance, ended up with $8,000 by selling a rare Beatles album. Her copy of “Yesterday and Today,” which she bought in 1966 at a Sears store, bore the “butcher” cover that had been recalled by the record company. She had not paid it much attention until a relative mentioned a couple years ago that the album might be worth a lot of money.

Experts on “Antiques Roadshow” on PBS confirmed that the record was valuable. She spent half the proceeds from the sale on repairing her roof and the rest on her first trip to Europe, including a walk on Abbey Road, made famous by another Beatles album.

Initially, conceded Ms. Moore, an administrative assistant in Schaumburg, Ill., “I didn’t know what to do with it.”

For those who had gotten much more money, investing in C.D.’s, mutual funds and real estate was attractive, but making the bigger choices remained daunting, sometimes for months.

Mr. Jennings said, “The fun part for me was seeing my face with some seven-figure number below it,” when he was on “Jeopardy.” “It was like playing Pac-Man. It never felt real, but when Alex Trebek pulled a seven-figure check from his pocket, I almost fainted. It wasn’t a video game score. I was now ‘the millionaire guy.’”

His advice now? “Put your money somewhere not idiotic and leave it alone as much as possible.”

On The Net : The New York Times

Cynicism is the new reality in America today. This post from a reader called Fifty First State, over at Marketwatch. How appropriate?

Hmmm, I hope I don’t sound to cynical about the Lehman situation but I suspect the plan by “Da Boyz” and their “mole” in the Bush administration, Henry Paulson, was to skim off all the profitable parts of Lehman, divide the spoils, and leave the c*** for the government (we the taxpayer) to pay off. Something like $85 billion of junk paper I understand. Still, what’s another $100 billion debt?

Then of course, Phase 2 of “Da Boyz” plan would kick in. That other “mole”, Bernanke, could crank up the printing press, throw more money out of his helicopter (he needs a new engine by now considering the time that helicopter has spent in the air) get the government to buy all that junk paper and thus flood the world with more US confetti pesos which would bring our once mighty dollar closer to the status of junk money.

This is one of the saddest periods in America’s history. We owe so much money (around 10 to 12 trillion $$$ I think is the current number) our children, grandchildren and probably our great grandchildren, will be paying for the mistakes that incredible clown in the White House has made, for decades to come.

We have to beg the Chinese and Japanese not to cash in our IOU’s. We print more and more confetti US pesos. Only the crappy little countries worry about our military might and now, from Pakistan’s latest threat to kill any US troops on Pakistan’s land, even THEY are not impressed while Russia and China shake their heads and hide their laughter.

Now, some of the most most respected financial firms (respected once but not now) are going down the tubes one by one and we are hated in most of the world. A friend in the UK told me recently, “Listen, if you decide to visit europe, tell anyone who ask you are Canadian.”

It’s very, very sad but we deserve it. While we watched football and shopped for that 50″ flat screen tv, “Da Boyz” were busy shoveling money into their off-shore accounts and thinking up new schemes to skim as much off the 401k’s as they could or begin a Ponzi Scheme (like the mortgage mess).

Most people are the architects of their own financial misery. Tell them that and they will not be publicly accepting of this realization. Ask them to change their circumstances by trying out something they are uncomfortable with or with an idea never attempted before – they will balk.

One thing is for sure. Their problems and their complaints will remain the best of friends. The victim mentality for the most part triumphs. The idea that life can change in a profound manner, not just for themselves but for their family by taking some huge but well calculated risks is never an option. They do not want to come in between the friendship they have cultivated for their pals – Problems and Complaints.

I normally do not shell out $16.99 to read advise from some author to get life changing messages. My idea of wisdom is this. If a sentence cannot get the message across to you, then a book won’t. Nothing will.

Words are profound. They have deep rooted meaning. Most of them bypass the first sentence to the next without properly absorbing its message. To absorb the message is to put it to use. Else you are always in the mental state as in – I already know this.

Sure! You know many a things. But you only know what you have experienced. If you have read but not experienced, then trust me, you don’t know. Not just yet.

Read what Christina has to say about – The financial roadblock. If it does not affect you in some way to take action, then I know one thing – You must be filthy rich!

On The Net : The Financial Roadblock

AOL’s founder Steve Case, came up with a PayPal competitor last year when he announced RME. Revolution Money Exchange is a payment transfer agent just like PayPal with some degree of alternate features. There are no fees currently to send and receive money.

You will even earn $25 just to create a new account and get paid $10 per referral you make until the 15th of May, 2008. There is a limit of $500 earnings cap per individual. So hurry and get your account and earn your free bucks now. Yes, it is real cash!