When Broke People Get Money …

There’s a fascinating hashtag trending on Twitter as I write this called #WhenBrokePplGetMoney. I love this hashtag because I get to read responses from “ordinary” people — people who don’t read financial blogs and books, people who wouldn’t normally visit this website. Their answers reveal a lot about how our society conceptualizes rich, poor, and windfalls. Here’s what they’re saying:

@Fatty_Kami: #Whenbrokepplgetmoney They Blow It In One Day

@AyannaFlySolo: #whenbrokepplgetmoney they dont know how to act!

@MySkinIsMySin: #whenbrokepplgetmoney they try to buy EVERYTHING
@IBreatheMusiq: #Whenbrokepplgetmoney they’ll put rims on a piece of sh*t car

@antmoorfield: Competitive capitalism is alive and well at #whenbrokepplgetmoney. Some good prejudice and stereotyping there from the economically secure.

@DopeassvanZ: #whenbrokepplgetmoney they blow it all on clothes and shoes

@darkmavisxxx: #whenbrokepplgetmoney the first thing they buy is an 874 inch TV.

@SameOl_GC: #whenbrokepplgetmoney they pay the Direct TV Bill and cell phone bill and ask the landlord for an extension

@MissyyE: #WhenBrokePplGetMoney they lose it quick.

@Flygeriaa: #whenbrokepplgetmoney they completely forget that they owe you

And my personal favorite …

@BeaumontTXChess: #whenbrokepplgetmoney Send me some and I will let you know.

What Are People Saying?

With a few exceptions, most people seem to be saying the same thing: the broke are broke for a reason. The broke can’t manage money well. They spend too much and save too little.

Interestingly, the few who defend broke people are the ones who write with full sentences and proper grammar, using phrases like “competitive capitalism” to show that they’re educated. I wonder if they formed their opinion from real-world observation or from a textbook? How many truly “broke” people do they know intimately?

What Are People NOT Saying?

Just as interestingly, many people didn’t jump to one obvious purchase that “broke people” allegedly make. Opinion seemed spread as to whether the money would be spent on clothes, cars, wheel rims, alcohol, drugs, shoes, cell phones, or TV. There was only one conclusion people agreed on: the money would get spent.

What Really Happens?

What really happens “when broke people get money” depends on who you are. If you’re William “Bud” Post, who won $16.2 million in the Pennsylvania state lottery in 1988, you’ll be $1 million in debt within a year. Post filed for bankruptcy a year after he won the lottery and now lives on food stamps and a $450 monthly stipend, according to Business Insider.

Suzanne Mullins of Virginia suffered a similar fate: she won $4.2 million in 1993 and opted for yearly increments instead of a lump-sum. But she quickly spent more than she received and used her future payments as collateral for a $200,000 loan, on which she promptly defaulted. The loan company successfully sued and was awarded $154,000, but they couldn’t collect because she no longer had any assets.

Sometimes the Broke Need A Break

But other lottery winners have used their gains as impetus to better their lives in a sustainable way. When Chris and Tina Crane won $42 million, they used it to trade-in their Michigan home … for a pecan farm in Georgia, reports ABC News affiliate WZZM 13. Every morning they rise before dawn to milk cows, bale hay, drive the tractor and live a farmer’s lifestyle. Chris, age 52, calls it “retirement” — a chance to work a job he loves rather than a job he needs — but adds, “I probably work harder now than I ever did.”

When Jeffrey Dampier won $20 million in the Illinois lottery in 1996, he launched a successful retail business selling gourmet popcorn. He also became a lottery success story: a man who invested his winnings in starting a small business that provided him with a career he loved and stable income. (Unfortunately, his sister-in-law murdered him in the hopes of getting an inheritance. She’s now serving a life sentence.)

So What’s the Verdict?

It all comes down to attitude.

Broke is temporary. Some people see “broke” a temporary state that lasts 20 or 30 years. Perhaps you were born into a very low-income family. Perhaps you had to balance two jobs in high school while studying late into the night for a shot at a scholarship. Perhaps you have to start at a community college before you can transfer to a more expensive 4-year school, and you need federal loans to finish your degree. Perhaps you had to take the bus to job interviews because you couldn’t afford a car.

But internally, you believe this is temporary. You’ll finish college. You’ll get a good job. You have great money management skills and a strong sense of personal responsibility, and every time you get a little bit of money, even just $5 or $10, you invest it wisely — buying a textbook, opening a Roth IRA, starting a savings account. Soon it adds up to $1,000, and then $3,000, and you discover the power of compounding interest.

Then there are those who stay chronically poor. Every time they get money, they spend foolishly and lose it. What’s sad is that some of these people are benevolent — some give to family and friends who want loans and handouts — but at the end of the day, they’ve failed to use money as an opportunity to invest in their education, their job training or their future.

Look at what successful lottery winners did: they purchased job security.

So What Happens When Broke People Get Money?

My favorite answer said it best:

@BeaumontTXChess: #whenbrokepplgetmoney Send me some and I will let you know.
****


Sources: Big Lottery Winners Who Buck the Death and Destruction Trend, Debbie Schlussel
10 Lottery Winners Who Lost It All, Business Insider


Celebrities Gone Broke: How Stars Go From Riches to Rags



We all hear about broke celebrities going belly-up in a pile of debt — but is it purely lavish spending that’s to blame, or are there special costs that get between celebrities and their earnings?

Let’s take a look at society’s most egregious (and now broke!) celebrities. Who lives like a rock star — and declares bankruptcy soon afterward?

Lindsey Lohan

This paparazzi darling can’t seem to stay out of the headlines: thanks to a series of drunk driving arrests and visits to rehab, the once sought-after child star hasn’t been able to land a movie role (read: she’s unemployed) since 2007, when she was fired from the aptly-named Poor Things after her DUI arrests caused the filming to be delayed not once, but twice.

Yet Lohan needs to foot the bill not just for her legal defense, but also for a pricey rehab clinic catering to the well-heeled — the Cirque Lodge Treatment Center in Sundance, Utah is reported to cost $30,000 per month.

So how has she been hustling for a few extra bucks on the side?

  • Filing Lawsuits. In March 2010, Lohan sued E-Trade for a whopping $100 million, claiming the financial services firm used her likeness without her permission.
  • Alleged Theft. A celebrity still has to look beautiful, right? In February 2011 Lohan was arrested for allegedly stealing a $2,500 necklace from a jewelry store. She pled not guilty and the case is pending.
  • Sponsored Tweets. For only $2,985, @lindsaylohan will tweet your company’s ad. Embarrassingly for her, Lohan’s on-again, off-again girlfriend, DJ Samantha Ronson, earns more than double: $7,000 to $10,000 per tweet.
  • Launching a New Career. Her attempts to land acting gigs are falling flat — according to many reports, insurance companies won’t grant coverage to any movie that casts her. So she’s trying her hand at other jobs. She launched a clothes line, released a self-tanning spray and became an adviser to a French fashion house … until the fashion collection under her guidance received such “disastrous” reviews that she ultimately exited that business, as well, departing the fashion house in March 2010.

TLC

T-Boz, Left Eye and Chilli — remember the trio who rose to fame in the 1990’s with the lyrics “Don’t Go Chasin’ Waterfalls” and “I Don’t Want No Scrub”? A lack of sales was never their problem: the Grammy-winning group rose to fame BEFORE the days of Napster, when fans eagerly spent $15 – $18 on their CD’s. In fact, TLC sold more than 11 million copies of their sophomore album, CrazySexyCool. And yet in 1995, at the peak of their career — I repeat, at the PEAK of their career — this chart-topping trio declared bankruptcy, claiming more than $3.5 million in debt.

What happened?

  • Legal trouble, for starters. Lisa “Left Eye” Lopez stood trial for suspected arson after she allegedly burned her boyfriend’s Atlanta mansion to the ground. Her lawyers claimed that she had a drinking problem; the defense both kept her out of jail and forced her into rehab. Nonetheless, the insurance payments took a big bite out of her wallet.
  • Pay disputes and troubles with management also hounded the group, as they hired and fired a series of producers — including one producer who fathered the baby of one of the members of the trio.
  • Health issues also took center stage — or rather, took them OFF the center stage — as T-Boz’s sickle cell anemia often left her too sick to perform, costing the group an untold amount in opportunity cost.

MC Hammer

Perhaps the most famous celebrity-going-broke cases, M.C. Hammer almost single-handedly defined the 1990’s with his Hammer pants, Hammer style and Hammer time. Yet where he failed was in Hammer restraint: he reportedly splurged his wealth on a lavish lifestyle that included a $12 million California mansion, enormous stables housing 19 Throughbred racehorses, and a paid staff of around 200, according to Jet magazine. He declared bankruptcy in 1996 with $13 million in debt.

Yet for all the talk that M.C. Hammer lost his wealth to lavish spending, his choices were relatively modest when compared to his income. That $12 million home represented a little more than one-third of the $33 million he earned from his third album alone.

Far worse for his balance sheet may have been the lawsuits, of which there were many:

  • Singer Rick James sued him for copyright infringement on the song “U Can’t Touch This.” Hammer settled by naming James as a co-creator, which entitled James to a massive cut of the proceeds.
  • Composer Kevin Christian sued him for $16 million for copyright infringement on the song “Oh-Oh, You Got the Shing.” Hammer settled for an undisclosed sum.
  • Publishers Simon and Schuster sued him for allegedly taking an advance for a book, but never writing it.

When M.C. Hammer ultimately declared bankruptcy, he discharged half a million dollars in debt that he owed his lawyers.

He must have learned what rappers mean when they say “Mo’ Money, Mo’ Problems” … now that I’m rich, everyone wants to sue me!

MC Hammer photo courtesy virginmedia.com, Lindsay Lohan photo courtesy gossipcheck.com, TLC photo courtesy wikimusicguide.com