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The myth of "More Money" - A Family's Fall From Affluence

ceoarob

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This is an article that I've stumbled across and thought I should share it. The Fastlane book helped show me that even "more money" would probably leave me worse off. More money is not the solution when your gas tank has a hole in it. It's ludicrous to expect that I'm going to plug the hole in my gas tank with putting more gas in.

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http://www.nytimes.com/2010/11/26/business/26fall.html?pagewanted=1&_r=1&src=busln

Family’s Fall From Affluence Is Swift and Hard
By GERALDINE FABRIKANT
WAMEGO, Kan. — Grateful to have found work in this tough economy, 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.

Then 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, 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 a far cry from 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.

But as so often happens to those lucky enough to realize the American dream of sudden riches, the money slipped through the Martins’ fingers faster than they ever imagined.

They faced temptations to indulge, with the complexities and pressures of new wealth. And a pounding recession pummeled the value of their real estate and new financial investments, rendering their properties unaffordable.

The fortune evaporated in little more than a decade.

While many millions of Americans have suffered through this recession with only unemployment benefits to sustain them, Mr. Martin has reason to give thanks — he has landed a job at 59, however far away. He also had assets to sell to help tide his family over.

Still, Mr. Martin, a strapping man with a disarming bluntness, seemed dazed by it all. “We are basically broke,†he said.

Though he faulted the conventional wisdom of investing in stocks and real estate for some of his woes, along with poor financial advice, he accepted much of the blame himself.

“We spent too much,†he conceded. “I have a fourth grader, an eighth grader and a girl who just finished high school. I should have kept working and put the money in bonds.â€

Mrs. Martin recalled the summer night in 1998 when the family was having a spaghetti dinner at home in Paso Robles, in central California, and a bank representative called to ask where to wire the money. “It seemed like an unbelievable amount,†she said regretfully.

Soon after the money arrived, the family decided to leave Paso Robles, amid some lingering tensions that Mr. Martin felt with his brother and brother-in law, who had run the business. Mr. Martin had never been in management at the billboard company, though he had been on the board and worked at Martin Brothers Winery, another family business.

First, the Martins bought a house in Somerset, England, near the home of Mrs. Martin’s parents, and he decided to write a novel. At about the same time, they spent $250,000 on the 3.5-acre camp with four structures on Tupper Lake, deep in the Adirondacks, as a summer home. They began extensive renovations at the lake, adding a stunning three-story boathouse and two other buildings.

Clouds gathered quickly. Life in England turned sour when Mr. Martin’s novel, “Anthony: Conniver’s Lament,†did not sell, and the family’s living costs — school fees, taxes and even advice for filing tax returns — swelled. In 2002, fed up with England, the Martins chose a new base, Vermont, and plunked down about $650,000 for a home there, as renovations continued on the Tupper Lake property.

By March 2007, the Martins were determined to move to the lake full time.

They managed their expenses for a while, but the costs mounted and mounted some more as they worked at refurbishing the Adirondack property — eventually totaling a staggering $5.3 million, Mr. Martin said. He poured another $600,000 into the Vermont property, he said.

He vacillates between blaming the builders and blaming himself for letting costs get out of hand. “We should have built something quite modest,†he conceded.

Tensions rose in 2007 as summer came without any offers for the Vermont home.

“I thought that housing was going into a tailspin,†he said. “I had the feeling that something bad was happening.â€

So “we started selling cars, shotguns, antique furniture, whatever,†Mr. Martin said. The Aston Martin fetched $395,000. With a big gap in his employment history, he found a job teaching English at Paul Smith’s College near his home in Tupper Lake for $14,000 a year. For an additional $7,000, he coached the school’s cross-country runners.

Then came the financial crisis. The markets plunged, as did the value of the Martins’ trust. By fall 2008, with much of the family’s net worth tied up in housing, Mr. Martin faced a series of margin calls. He needed more cash in his brokerage accounts because he had been tapping into a credit line with his investments as collateral. In January 2009, he cashed in a retirement account worth roughly $91,000.

The houses could not be sold quickly. Though if they had been, some of the pressure would have lifted. “To maintain those things, you have to have a pretty good cash flow,†Mr. Martin said.

The family ultimately put the Adirondacks property on the market for $4.9 million, then quickly slashed the price by half. Last month, the Martins got an offer for just half of the latest $2.5 million asking price.

They have stopped making payments on their $1.1 million mortgage and their $53,000 in annual property taxes in the Adirondacks as well as the mortgage and taxes on their Vermont home. They cannot afford those obligations on Mr. Martin’s current salary of $51,000. Their household income is down from $250,000 four years ago.

At the moment, they are working with a loan modification unit at their bank. The lender proposed a new payment of $3,550 a month, reduced from $7,400. Given his current status, Mr. Martin argued, that it does not make much sense. He predicts that the house will ultimately be sold or taken over by the bank. Meanwhile, for the Christmas holidays and some of next summer, the family has found renters for the main house to help cover some of the costs.

Over lunch recently at Barleycorn’s Downtown Bar and Deli in Wamego, Mr. Martin said he believed “the worst is behind us.â€

Perhaps. But a forced restructuring can be difficult for children and spouses even in longstanding marriages.

Sometimes he and his wife took it out on each other, he said. “She bought a bunch of horses. I blamed her for the horses. I bought cars. She blamed me for the cars — and the house being too big. We had a rough time,†he acknowledged. “But I think we have gotten over that.â€

Until Christmas, when she plans to join him, Mrs. Martin continues to work as a substitute teacher with autistic children at an Adirondacks elementary school: a $12,000-a-year job she loves in a place she says she is hesitant to leave. With their younger daughter, she has moved into a smaller building on their big property.

A lively woman who loves bike riding and horses, she has built a close network of friends. “What is the place in Kansas like?†she asked a reporter with some trepidation before her first visit at Thanksgiving.

Mr. Martin, who moved to Kansas last April, brought the couple’s 13-year-old son, Edward, to join him in the fall. He has been counting the days until his wife and Sophia, 9, come permanently. The older daughter, Mrs. Martin’s from a previous marriage, has found work in Florida after finishing high school.

In the meantime, Mr. Martin is also overseeing a one-acre vineyard beside the Oregon Trail Road, drawing on his knowledge of the wine industry from his California days.

He does what he can to lessen the family strains.

“I have a temper. I have to control my temper,†he said. “I could drink like a fish, but if you have problems in your life, drinking does not help.â€

And he recites a quotation he holds dear : “The measure of a man is not whether he falls down, but whether he gets up again.†Still, Mr. Martin is prone to ruminate over the loss of so much money. 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.

His brother-in-law David Weyrich said that if Mr. Martin had objections to the sale, he did not voice them.

Mrs. Martin says she believes the move from California was motivated in part because he resented his brother and brother-in-law’s bigger role in the community.

She also speculates that the Adirondacks estate was alluring partly as a way of keeping up. “I think he wanted to show his brother and brother-in-law that he had a big home, too,†she said over dinner recently in Saratoga Springs, N.Y.

Mr. Martin disagreed. “We are Irish Catholics, and we thought itould be a compound for our family over generations,†he said. After the cramped rooms at their house in England, he liked the big rooms, he said. “Sometimes, things don’t work out.â€
 
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Rickson9

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Unfortunely if an individual does not take the time to educate themselves on reading and interpreting financial statements, these stories are bound to happen. There is no amount of money that can't be burned out by the human ego.
 

Runum

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Also what Aston Martin goes for $395k used?

My thought exactly. The one's I have looked at retail new for a lot less than that. Are there AM's that I am not aware of?
 
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Darkside

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The problem isn't that they didn't have a financial education. The problem is that they never earned that wealth. They inherited it due to their family connections and because they didn't work hard to earn that wealth they didn't appreciate it enough to be careful with their spending.

His brother and brother-in-law had an active role in the business which is why they got a lot more money than him but even if they got an equal amount, I doubt they would squander it the same way that he did because they earned that money as opposed to just having it handed to them.

I remember I made a similar point in another thread about how I have no respect for people who just inherit wealth; when you have everything handed to you in life you have no incentive to work hard or to save money because you were raised with a silver spoon in your mouth. The only rich kids that actually grow up to manage the wealth that they inherit well are the ones who were denied access to that wealth while growing up and only given a small allowance, like the Trump kids.

This documentary about young heirs to large fortunes illustrates my point well as almost every single one of those people are pathetic losers who do nothing with their lives other than party, drugs, and shop. If I was one of their parents I'd kick those kids out as soon as they turned 18 and force them to earn their own fortune so that both I and they could respect themselves later on, rather than be a good for nothing leech for the rest of their lives.


YouTube - Born Rich 1 of 7
 

CommonCents

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Making money and growing wealth can be one skill set, while managing and maintaining wealth is another.
 

ceoarob

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Darkside,

thanks for the YouTube video. I just got done watching all 7 of them. Very interesting.

Thanks again.
 
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Rickson9

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Making money and growing wealth can be one skill set, while managing and maintaining wealth is another.

Speaking for myself, both are the same. Wealth isn't static. An individual is either making decisions that will make them more wealthy or less wealthy in the future.

Both action and inaction is a decision. Either have the ability to create and destroy wealth.
 

Darkside

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Darkside,

thanks for the YouTube video. I just got done watching all 7 of them. Very interesting.

Thanks again.



You're welcome. Don't they disgust you? Most of them are disgusting, especially that Italian royalty guy who claims that secretly Americans want to have a class system with royalty at the top. If I could speak to him I'd tell him to take his pompous a$$ back to Italy where he belongs. The Whitney heir, Josiah Hornblower, seemed the most normal; and you can tell that he doesn't fit in with that crowd.
 

ceoarob

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You're welcome. Don't they disgust you? Most of them are disgusting, especially that Italian royalty guy who claims that secretly Americans want to have a class system with royalty at the top. If I could speak to him I'd tell him to take his pompous a$$ back to Italy where he belongs. The Whitney heir, Josiah Hornblower, seemed the most normal; and you can tell that he doesn't fit in with that crowd.

IMO, it was a REALLYYYY weird movie. It kinda made me go, "Damn...is THIS what money does to me?". Then, I had to realize that they are INHEIRITING their wealth versus me earning it.

It was the last statement of the movie that went something like, "Sometimes...the most valuable things in life are not given, but earned".

I could identify with different parts of each person's background and personality, and Hornblower (if he was the one who worked in the oil field) did seem like the most normal person.

But the whenever I looked at each of them, they just seemed kinda soul-less. That's just my opinion. Like, they had no drive, no purpose, no higher goals and ideals. That triggered some hidden fear in my mind that "money is going to make me lazy like these kids", then I realized it's just a matter of choice. Money doesn't do shit. It's the people behind the money that call the shots.

-AR
 
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Darkside

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IMO, it was a REALLYYYY weird movie. It kinda made me go, "Damn...is THIS what money does to me?". Then, I had to realize that they are INHEIRITING their wealth versus me earning it.

It was the last statement of the movie that went something like, "Sometimes...the most valuable things in life are not given, but earned".

I could identify with different parts of each person's background and personality, and Hornblower (if he was the one who worked in the oil field) did seem like the most normal person.

But the whenever I looked at each of them, they just seemed kinda soul-less. That's just my opinion. Like, they had no drive, no purpose, no higher goals and ideals. That triggered some hidden fear in my mind that "money is going to make me lazy like these kids", then I realized it's just a matter of choice. Money doesn't do shit. It's the people behind the money that call the shots.

-AR


That soul less quality that you notice is in my opinion sort of like the difference between a lion in a zoo and a lion in the wild. The lion in the zoo is given the best care that money can afford; prime cuts of meat, a dry place to sleep, treatment for his physical ailments whenever he needs it, whereas the lion in the wild has to kill his own food, is always worrying about other lions as well as poachers, and if he gets wounded no one will treat his wounds. However, which lion do you think is happier? I've been to the zoo many times and the lions there seem depressed; there's no objective for them in life other than to lay around so that visitors to the zoo can watch them. They don't get to enjoy the joy of the hunt or the freedom to roam wherever they please like the wild lions enjoy.

Rich kids are just like the zoo lions; they're given everything of material value that a human being could ever want but because they're born rich they don't have to actually earn money for themselves so they become lazy and lack ambition. What would be the point of working for a living or starting a company if you're already an heir to a fortune? So, it makes sense that rather than try to accomplish something great, most of them just spend their time going to parties, shopping, and doing drugs. But, because they didn't earn that wealth themselves, they don't appreciate it to the same extent that a self-made wealthy person would.

The self-made wealthy person is like a wild lion who also has the resources of the zoo lion; if he loses his wealth he can make it back because he'll have the confidence and knowledge from his prior experiences, whereas if you cut off these rich kids, they wouldn't be able to earn a fortune on their own; they would just bitch and moan for the rest of their lives like the couple in this article.
 

ceoarob

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That soul less quality that you notice is in my opinion sort of like the difference between a lion in a zoo and a lion in the wild. The lion in the zoo is given the best care that money can afford; prime cuts of meat, a dry place to sleep, treatment for his physical ailments whenever he needs it, whereas the lion in the wild has to kill his own food, is always worrying about other lions as well as poachers, and if he gets wounded no one will treat his wounds. However, which lion do you think is happier? I've been to the zoo many times and the lions there seem depressed; there's no objective for them in life other than to lay around so that visitors to the zoo can watch them. They don't get to enjoy the joy of the hunt or the freedom to roam wherever they please like the wild lions enjoy.

Rich kids are just like the zoo lions; they're given everything of material value that a human being could ever want but because they're born rich they don't have to actually earn money for themselves so they become lazy and lack ambition. What would be the point of working for a living or starting a company if you're already an heir to a fortune? So, it makes sense that rather than try to accomplish something great, most of them just spend their time going to parties, shopping, and doing drugs. But, because they didn't earn that wealth themselves, they don't appreciate it to the same extent that a self-made wealthy person would.

The self-made wealthy person is like a wild lion who also has the resources of the zoo lion; if he loses his wealth he can make it back because he'll have the confidence and knowledge from his prior experiences, whereas if you cut off these rich kids, they wouldn't be able to earn a fortune on their own; they would just bitch and moan for the rest of their lives like the couple in this article.

I agree wholeheartedly with this and it's probably the BEST analogy to what these kids are like.

They don't even have to deal with the basic "shit" of life. They've pretty much got everything handed to them. I sympathize with their situation, but of course, the real question is: "If they were cut off today, would they be able to survive on their own?"

That's why Ivanka Trump was actually one of my favorites from the movie. I know that she currently has her fashion and perfume line for women. I don't know all the details about it, but at least she's doing SOMETHING with her life.

The big thing that one of the fathers said was, "I don't care WHAT you do, you just have to do SOMETHING". That's true for everyone.

In addition, I think that "having your kids grow up poor" is a pretty good idea. I wouldn't necessarily have my kids "grow up poor", but I'd teach them to appreciate the value of money and I'd also teach them financial literacy from an early age. Since it's not taught in the schools, I'd have to teach them myself. I wouldn't let them live in this opulent, affluent lifestyle with servants, maids, and butlers. I'd teach them hard-work and basic work ethic.

I'm going to go to bed and have haunting nightmares about rich kids who party in the Hamptons.
 

Rickson9

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When I first saw the video a couple years ago I found the individuals interesting. I rarely have a negative opinion of people. With regards to the filmmaker and the individuals in the film I appreciate them sharing and contributing to my continual development.
 
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Red

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It's always amusing how quick to judge human beings can be. To the kid in the trailer park with no heat in the winter, I look like someone who inherited my "wealth". To the kid in the 3rd world country, the fact that I am able to take a hot shower every morning both arouses astonishment & envy. I really did nothing to get that, other than be lucky enough to be born into this country. Our "lavish lifestyles" are kind of a given here.

All I'm saying is, it's all relative. Let people be who they are. Choose to be who you want to be & make the decisions that embody that person.
 

GlobalWealth

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Both action and inaction is an decision. Either have the ability to create and destroy wealth.


Great little nugget. Speed.
 

Runum

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It's always amusing how quick to judge human beings can be. To the kid in the trailer park with no heat in the winter, I look like someone who inherited my "wealth". To the kid in the 3rd world country, the fact that I am able to take a hot shower every morning both arouses astonishment & envy. I really did nothing to get that, other than be lucky enough to be born into this country. Our "lavish lifestyles" are kind of a given here.

All I'm saying is, it's all relative. Let people be who they are. Choose to be who you want to be & make the decisions that embody that person.

Some perspective is always good.
 

TonyStark

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Speaking for myself, both are the same. Wealth isn't static. An individual is either making decisions that will make them more wealthy or less wealthy in the future.

Both action and inaction is a decision. Either have the ability to create and destroy wealth.
I agree!
 

theag

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Typical heir. At least he lived "the good life" for a few years before fading back to nothingness.

some lingering tensions that Mr. Martin felt with his brother and brother-in law, who had run the business. Mr. Martin had never been in management at the billboard company
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

lulz, what a F*cking idiot
 
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IrishSpring600

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The problem isn't that they didn't have a financial education. The problem is that they never earned that wealth. They inherited it due to their family connections and because they didn't work hard to earn that wealth they didn't appreciate it enough to be careful with their spending.

His brother and brother-in-law had an active role in the business which is why they got a lot more money than him but even if they got an equal amount, I doubt they would squander it the same way that he did because they earned that money as opposed to just having it handed to them.

I remember I made a similar point in another thread about how I have no respect for people who just inherit wealth; when you have everything handed to you in life you have no incentive to work hard or to save money because you were raised with a silver spoon in your mouth. The only rich kids that actually grow up to manage the wealth that they inherit well are the ones who were denied access to that wealth while growing up and only given a small allowance, like the Trump kids.

This documentary about young heirs to large fortunes illustrates my point well as almost every single one of those people are pathetic losers who do nothing with their lives other than party, drugs, and shop. If I was one of their parents I'd kick those kids out as soon as they turned 18 and force them to earn their own fortune so that both I and they could respect themselves later on, rather than be a good for nothing leech for the rest of their lives.


YouTube - Born Rich 1 of 7
That's how I feel like right now...like a leech...I just don't know what's in demand...
 

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