While in Asheville, we toured the Biltmore Estate<\/a>, the largest home in the U.S. This 250-room chateau contains 179,000 square feet of floor space — including 35 bedrooms, 43 bathrooms, and 65 fireplaces — and originally sat on 195 square miles of land. (Today, the estate “only” contains 8000 acres.)<\/p>\n “This feels like Downton Abbey<\/em> but in North Carolina,” I said as we walked the endless halls. Just as Downton Abbey<\/em> documented the excesses of British upper class, so too the Biltmore sometimes feels like an example of how rich Americans indulged in decadence.<\/p>\n George Washington Vanderbilt II<\/a>, the man who built Biltmore, was a member of one of the country’s wealthiest families. His grandfather, Cornelius Vanderbilt<\/a>, was born poor in 1794, but by the time he died in 1877 he had become one of the richest men in the world. During his lifetime, he built a fortune first from steamships and then as a prominent railroad tycoon.<\/p>\n By family standards, grandson George didn’t have a lot of money. He inherited about $7 million, and drew income from a $5 million trust fund. He decided to use the bulk of his fortune to build a huge house high in the Appalachians. Work on the Biltmore Estate began in 1889, when George was 26 years old<\/em>. Six years and $5 million later, he moved into his palace. (That $5 million would be roughly $90 million in today’s dollars.)<\/p>\n Strolling the grounds of the Biltmore Estate got me thinking about the stories we hear of wealthy people who squander their riches. How and why do they do this?<\/strong> Are there lessons from their stories that you and I can put to use?<\/p>\n We hear all the time about the “lifestyles of the rich and famous”. Today, on April 1st, let’s look at some lifestyles of the rich and foolish<\/em>.<\/p>\n There are so many stories of athletes and entertainers who have blown big fortunes that it’s tough to know where to start. Who should we pick on first? Since I’ve never been a fan of Nicolas Cage — and since he seems to be especially bad with money — let’s use him an example.<\/p>\n Over a period of fifteen years, Cage earned more than $150 million. He blew through that money<\/a> buying things like:<\/p>\n It’s not fair to characterize Cage as “broke” — he’s still a bankable movie star — but his net worth is reportedly only about $25 million. (That’s like someone with an average income having a net worth of roughly $25,000.) He could be worth ten times as much but his foolish financial habits have caused him woe<\/a>.<\/p>\n Cage got in trouble with the IRS for failing to pay millions of dollars in taxes<\/a>. He’s been sued by multiple companies for failing to repay loans. His business manager says that he’s tried to warn Cage that his lifestyle exceeds his means, but the actor won’t listen.<\/p>\n Cage is but one of many<\/em> celebrities who have done dumb things with money. Other prominent examples include:<\/p>\n When it comes to frittering way fortunes, it’s hard to compete with sports superstars. In a 2009 Sports Illustrated<\/em> article about how and why athletes go broke<\/a>, Pablo S. Torre wrote that after two years of retirement, “78% of former NFL players have gone bankrupt or are under financial stress.” Within five years of retirement, roughly 60% of former NBA players are in similar positions.<\/p>\n Some examples:<\/p>\n It can be tough to sympathize with these folks. Used wisely, their immense fortunes could sustain them and their families for a long time. Instead, they squander their money on fleeting pleasures and the trappings of wealth.<\/p>\n Still, I believe it’s best to keep the schadenfreude<\/em><\/a> in check. “There but for the grace of God<\/a>” and all that, right? I’ve seen plenty<\/em> of examples of average folks who have wasted smaller windfalls. In fact, this sort of thing seem to be the rule rather than the exception.<\/p>\n But why does this happen? The answer might be Sudden-Wealth Syndrome.<\/p>\n Lottery winners have the same kinds of problems<\/a>. A 2001 article in The American Economic Review<\/em> found that after receiving half their jackpots, the typical lotto winner had only put about 16% of that money into savings. It’s estimated that over a quarter of lottery winners go bankrupt.<\/p>\n Take Bud Post: He won $16.2 million in 1988. Within weeks of receiving his first annual payment of nearly half a million dollars, he’d spent $300,000. During the next few years, Post bought boats, mansions, and airplanes, but trouble followed him everywhere. “I was much happier when I was broke,” he’s reported to have said. When he died in 2006<\/a>, Post was living on a $450 monthly disability check.<\/p><\/blockquote>\n In 2012, ESPN released a documentary called Broke<\/em><\/a> that explores the relationship between pro athletes and money. How does sudden wealth affect young men? What happens when highly-competitive athletes with high incomes hang out together? Lots of stupid stuff, as it turns out.<\/p>\n Broke<\/em> is an interesting film. The players speak candidly about the mistakes they’ve made: buying 25 pairs of shoes at one time, buying fur coats they never wore, buying cars they never drove. They’re not proud of their pasts — some are ashamed — but they’re willing to talk about the problem in the hopes they can help others avoid doing the same dumb things in the future.<\/p>\n Curious how much your favorite actor or athlete earns? Check out Celebrity Net Worth<\/a>, a website devoted to tracking the financial health of people in the public eye.<\/p><\/blockquote>\n Broke<\/em> does a good job of explaining why our sports heroes can’t seem to make smart money moves. The problem is Sudden-Wealth Syndrome<\/a>. Essentially, young folks who earn big bucks don’t get a chance to “practice” with money before they’re buried with wealth.<\/p>\n The typical person earns a little when they’re young, but watches their salary grow slowly with time. Their income peaks during their forties and fifties. As a result, they get time to make mistakes with small amounts of money first which means (in theory) that they’re less likely to blow big bucks down the road.<\/p>\n On the other hand, athletes (and entertainers) have a completely different earning pattern. They leave school to instant riches. For a few years, they earn great gobs of money. But usually their income declines sharply with time — until it stops altogether.<\/p>\n Here’s a (pathetic) chart I created to help visualize this phenomenon:<\/p>\n Athletes and entertainers need to figure out how to make five years of income last for fifty<\/em> years. This never occurs to most of them. “[A pro athlete] can’t live like a king forever,” says Bart Scott<\/a> in ESPN’s Broke<\/em>. “But you can live like a prince<\/em> forever.”<\/p>\n Sudden-Wealth Syndrome doesn’t just affect athletes and actors. Lottery winners experience it too. So do average folks who inherit a chunk of change or business owners who sell their companies.<\/p>\n The fundamental problem is that nobody ever teaches us how to handle a windfall. Windfalls are rare, and in most cases they can’t be planned for. (Some folks might be able to plan for an inheritance or the sale of a business, but these situations are relatively uncommon.) As a result, when the average person happens into a chunk of change, they spend it.<\/p>\n Here’s what you should do instead.<\/p>\n When you receive a windfall, whether it’s a tax refund, an inheritance, a gift, or from any other source, it’s like you’ve been given a second chance. Although you may have made money mistakes in the past, you now have a chance to fix those mistakes (or some of them, anyhow) and start down the path of smart money management.<\/p>\n It can be tempting to spend your windfall on toys, trips, and other things that you “deserve,” but doing so will leave you in the same place you were before you received the windfall. And if that place was chained to debt, you’ll be just as unhappy as you’ve always been.<\/p>\n If you receive a chunk of cash, I recommend that you:<\/p>\n To successfully manage a windfall, you must<\/em> allow the initial euphoria to pass, getting over the urge to spend the money today. Live as you were before. Meanwhile, calculate how far your windfall could go. Most people have unrealistic expectations about how much $10,000 or $100,000 can buy.<\/p>\n In 2009, I received an enormous windfall. The old J.D. would have gone crazy with the money. The new, improved model of me was prepared, and made measured moves designed to favor long-term happiness over short-term happiness.<\/p>\n Today, the bulk of my windfall remains in the same place it’s been for the past five years: an investment account. That cash eases my mind. It helps me sleep easy at night. And that’s more rewarding than spending it on new toys could ever be.<\/p>\n Not everyone who gets rich quickly does dumb things with money. Especially as the plight of pro athletes becomes better known, there are prominent examples of young superstars making savvy money moves<\/a>. They’re learning from the lessons of those who came before.<\/p>\n Take Toronto Raptors superstar Kawhi Leonard, for instance. This 27-year-old NBA MVP earns $23 million<\/em> per year — but still clips coupons for his favorite restaurant. He drives a 1997 Chevy Tahoe. Sure, he bought himself a Porsche, but he’s not interested in flash and bling. “I’m not gonna buy some fancy watch just to show people something fancy on my wrist,” he says. [source<\/a>]\n Jamal Mashburn has made wise use of his wealth<\/a>. So has LeBron James, who takes his investment advice from Warren Buffett:<\/p>\n![\"The](\"https:\/\/www.getrichslowly.org\/wp-content\/uploads\/26169061005_3b5a191b38.jpg\" "\\"The")
<\/p>\n<\/span>Lifestyles of the Rich and Foolish<\/span><\/h2>\n
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<\/span>Sudden-Wealth Syndrome<\/span><\/h2>\n
![\"Sudden](\"https:\/\/www.getrichslowly.org\/wp-content\/uploads\/25954866562_ae9dacee86.jpg\" "\\"Sudden")
<\/p>\n<\/span>How NOT to Waste a Windfall<\/span><\/h2>\n
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<\/span>Setting a Good Example<\/span><\/h2>\n