Last week I saw a preview of an upcoming Oprah show about what happens to people when they experience a financial windfall. As most people that read PF blogs would guess, it doesn’t usually turn out too well. I finally got a chance to watch the Oprah show that I had Tivo’d last week and found it pretty interesting.
First there was a lady that built a successful clothing business in NY. As her business did better and better, she made more and more money. Needless to say, she also spent more and more money. Never, throughout her experience did it ever dawn on her that the money could run out. She saved nothing. To make matters worse, she ended up with a tiny cocaine habit. ($600 per day). Her rock bottom was living in the train tunnels in NYC. As I heard the woman say that she never thought about putting money away for later, images of a couple people I know came straight to the front of my mind. Regardless of whether you experience a windfall of a large amount of money or just make an average annual income, it is extremely important to plan for the future. Maybe your income will continue for the rest of your life, but most likely, you will go through a number of changes in your lifetime and you’ll need some money working for you.
The most interesting guest on the show was a homeless man. He had agreed to let a film crew film him day after day to see what his life was like. Little did he know that as the filming went on, the film crew would lead him to $100K (of Showtimes money). The first thoughts he had were of how this money would change his life. He could get an apartment, get transportation, and get a job. Well, when reality finally kicked in for him, he had nothing left. He blew the money on a $34,000 truck, bought a car for his friend at the aluminum can recycling center, and gave much of it away. He is now living on the street again and wishes that he hadn’t had the money given to him in the first place. You could tell that it was a stressful experience for him. Oprah stated a figure that 70% of people who experience a windfall, end up with nothing in the end.
It is tragic that we don’t teach simple money management skills in school. It is even more tragic that so many people in our society can’t let a dollar stay in their pocket. The reality is that if everyone magically started saving 10% of everything they made, we’d go in to one hell of a depression. I could get all “Oliver Stone” about it and think that there are so many people in high places that don’t want the citizens to save, but I won’t.