Author Topic: Blew Through 425K in Less Than a Year  (Read 6742 times)

crispy

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Blew Through 425K in Less Than a Year
« on: August 29, 2014, 03:40:15 PM »
A friend of mine's parents inherited 425K last year from a relative.  They are both in their late 50s and early 60s without a pot to pee in (they currently live in a not-so-nice trailer and are always living on the financial edge). The area they live in has a ridiculously low cost of living.  As in, you could buy 5 acres of land and a 2000sf house for about a 100K or less.  This money could have easily bought them a nice, comfortable home and given them enough to live on for the rest of their lives if they lived modestly.  Instead, they decided to take vacations, buy expensive farm equipment, buy a bunch of furniture, and build a 4300sf house (for two people).  My friend found out today that they no longer have money to finish the house and are taking on a reverse mortgage to finish it off.  She is not supposed to know but found out when her brother (who is the general contractor on the house) called to asked her to borrow money from her because they haven't paid him what they owe him because they ran out of money.

I am just floored.  They are both well-educated people that had professional careers so ignorance shouldn't be an excuse.  I feel really bad for my friend because she wants to talk them about it but feels she can't because she isn't supposed to know in the first place.  She said her brother mentioned just selling the house when it was completed, but they adamantly said no. 

It just made me sad and sick at the same time.  They are genuinely nice people, and it's a shame that they wasted such an opportunity.
« Last Edit: August 29, 2014, 03:43:33 PM by crispy »

4alpacas

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Re: Blew Through 425K in Less Than a Year
« Reply #1 on: August 29, 2014, 03:48:57 PM »
This makes me sad.  On the bright side, I am fortunate that my parents will never put me in this position.

Albert

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Re: Blew Through 425K in Less Than a Year
« Reply #2 on: August 29, 2014, 04:19:47 PM »
Stupid, should have saved, invested, how could way, the usual oh and ah… True of course, but then again they are probably no worse off than before they got the money. Folks just decided to have a bit of fun with a money they didn't earn anyway.


I like to think I'd do much better if someone just gave me large amounts of money, but who knows… Won't have a chance to find out as paid house is the only thing parents are likely to leave to me and hopefully not soon.

Elderwood17

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Re: Blew Through 425K in Less Than a Year
« Reply #3 on: August 29, 2014, 07:55:47 PM »
Tragic lost opportunity.

RetiredAt63

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Re: Blew Through 425K in Less Than a Year
« Reply #4 on: August 30, 2014, 12:01:11 PM »
You probably would - when I have seen people get large chunks of money their behaviour has tended to stay the same - the spenders saved a little but mostly spent, the savers spent a little but mostly saved.

I have begun to wonder if we hear all the stories of lottery winners going broke because they were spenders to start with - do savers buy a lot of lottery tickets? Or do they do the math and figure the odds are horrible, and save instead?

Too bad about the OP's friend's parents - that was a golden opportunity.  However, I don't think well-educated professionals are necessarily any better with their money than anyone else.  They just have enough coming in that they don't feel the pinch.


I like to think I'd do much better if someone just gave me large amounts of money, but who knows… Won't have a chance to find out as paid house is the only thing parents are likely to leave to me and hopefully not soon.

Dicey

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Re: Blew Through 425K in Less Than a Year
« Reply #5 on: August 30, 2014, 12:06:04 PM »
I have begun to wonder if we hear all the stories of lottery winners going broke because they were spenders to start with - do savers buy a lot of lottery tickets? Or do they do the math and figure the odds are horrible, and save instead?

Yeah, this about sums it up, except that I'd substitute the word gamblers for spenders.

Albert

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Re: Blew Through 425K in Less Than a Year
« Reply #6 on: August 30, 2014, 12:45:04 PM »
Lottery winners are random, but skewed more towards older and poorer people. Large amounts of money + people who have no experience handling money and results are sometimes not pretty. However don't forget observation bias - no newspaper stories are written about lottery winners who did well with their unexpected windfall.

frugledoc

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Re: Blew Through 425K in Less Than a Year
« Reply #7 on: August 30, 2014, 02:37:31 PM »
It's not really blowing it if they at least have some assets to show for it like an incomplete property and land.


Blowing it would have left them with nothing.

crispy

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Re: Blew Through 425K in Less Than a Year
« Reply #8 on: August 30, 2014, 03:02:04 PM »
It's not really blowing it if they at least have some assets to show for it like an incomplete property and land.


Blowing it would have left them with nothing.

Now they only have one small SS income since they both quit their jobs upon receiving the money.  She doubts the amount of money they get per month will cover basic bills like food, electricity, home insurance, property taxes, etc., so she expects them to keep tapping into the reverse mortgage until all the equity is gone.  That's why she wants to encourage them to sell to recoup some of the money o they can buy a smaller home and have some savings, but her brother said they were adamantly against the idea.

okashira

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Re: Blew Through 425K in Less Than a Year
« Reply #9 on: August 30, 2014, 03:11:04 PM »
I nominate this one for Anti-MMM of the year award.

MrsPete

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Re: Blew Through 425K in Less Than a Year
« Reply #10 on: September 01, 2014, 10:46:13 AM »
You probably would - when I have seen people get large chunks of money their behaviour has tended to stay the same - the spenders saved a little but mostly spent, the savers spent a little but mostly saved.

I have begun to wonder if we hear all the stories of lottery winners going broke because they were spenders to start with - do savers buy a lot of lottery tickets? Or do they do the math and figure the odds are horrible, and save instead?

Too bad about the OP's friend's parents - that was a golden opportunity.  However, I don't think well-educated professionals are necessarily any better with their money than anyone else.  They just have enough coming in that they don't feel the pinch.


I like to think I'd do much better if someone just gave me large amounts of money, but who knows… Won't have a chance to find out as paid house is the only thing parents are likely to leave to me and hopefully not soon.
This is pretty much everything I was going to say.  I have heard the thing about lottery winners tending to burn through their winnings in a short period of time.  When people get a windfall, the tendency is to spend in the same ways -- only in larger amounts. 

Sad, sad story.

And, yes, I definitely agree that professionals aren't necessarily more skilled or disciplined at managing their money.  Fewer of them are in financial straits only because they start with higher paychecks.  My own father was a CPA, yet he couldn't grasp that you shouldn't spend more than you earn.  It was as if he "knew the rules" but thought they didn't apply to him at home. 

Squirrel away

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Re: Blew Through 425K in Less Than a Year
« Reply #11 on: September 01, 2014, 10:56:56 AM »
Wow, what a waste of money and opportunity.

frugalnacho

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Re: Blew Through 425K in Less Than a Year
« Reply #12 on: September 02, 2014, 07:59:51 AM »
I saw my parents get a 25k inheritance and then blow through it all.  I have no doubt if it had been 425k, or any amount, they would have done the same thing. It's the mentality and the way they live their life.  It's like they are blind to the future and cannot anticipate regular bills that they have been paying every month for their entire adult life.  Or they do anticipate, but just don't care and spend the money before the bill is due.  It never ceases to amaze me when they tell me how hard it is and how life is so expensive after I just watched them waste more than enough money to pay that bill.  HELLO MCFLY!

I have $1,000 in hand...and $1,000 in bills due next month, what should I do?  New tv here I come!!!

AllChoptUp

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Re: Blew Through 425K in Less Than a Year
« Reply #13 on: September 02, 2014, 09:26:17 AM »
I nominate this one for Anti-MMM of the year award.

Seconded

odput

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Re: Blew Through 425K in Less Than a Year
« Reply #14 on: September 02, 2014, 11:39:21 AM »
I have $1,000 in hand...and $1,000 in bills due next month, what should I do?  New tv here I come!!!

HA!

Sad but true

crispy

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Re: Blew Through 425K in Less Than a Year
« Reply #15 on: September 02, 2014, 01:37:34 PM »
I saw my parents get a 25k inheritance and then blow through it all.  I have no doubt if it had been 425k, or any amount, they would have done the same thing. It's the mentality and the way they live their life.  It's like they are blind to the future and cannot anticipate regular bills that they have been paying every month for their entire adult life.  Or they do anticipate, but just don't care and spend the money before the bill is due.  It never ceases to amaze me when they tell me how hard it is and how life is so expensive after I just watched them waste more than enough money to pay that bill.  HELLO MCFLY!

I have $1,000 in hand...and $1,000 in bills due next month, what should I do?  New tv here I come!!!

This describes them to a T.  I have been friends with their daughter for close to twenty years, and they can just never get ahead because of making decisions like this.  Then they end up selling the TV for a $100 to put gas in the car while asking their children to borrow money so they can pay bills.  It is a never ending cycle of bad decision after bad decision.  The sad thing is, they perceive themselves as poor and others (like their son who is actually good with money) as being rich and lucky.   They have never connected the fact that their bad choices have led to their issues.  Even more ironic, they probably made more money than average when working so there was no reason for them to be poor. It was all about their choices.

Sadly, my friend, her husband, and her brother that is the acting contractor are also pretty horrible with money - maybe even worse than their parents.  The other brother is financially stable and keeps his distance.  It's a very sad dynamic.