Smart Reasons to Save, Use and Invest Money

The Curse of the Accidental Millionaire

The Curse of the Accidental Millionaire is not realizing that you are a millionaire!

What I mean by the previous statement is that instead of saving the money you earn and making it work in investments to become rich, you just increase your lifestyle to match your new income level and status. 

The problem is your stint as an Accidental Millionaire may be short-lived if you don’t have the assets to back it up!

The Curse of the Accidental Millionaire is really about a friend of mineAt one time he was a highly paid director for a decent sized company where he had about 46 people reporting to him.

He had it all, a BMW, a half million dollar house in the mid-west (which is the typical McMansion that everybody talks about), a country club membership, and the most elaborate vacations!

Why I remember him telling me that for New Years Eve, he took his wife to the Hilton hotel and spend over $1,000 just for that night!  Speaking of his wife, she of course has a $10,000 diamond wedding ring, with an equally expensive wedding wrap.  My friend and his wife would eat at restaurants that ran well over $100 for just the 2 of them.

Then misfortune happened, while I’m not sure of the exact details, he decided to work for a different company.  That company paid well too, until they laid him off…

Today he has nothing, my friend and his wife got a divorce and together they owe about $100,000 in debt.

If my friend had sunk that money in a balanced investment portfolio and controlled his spending by living below his means, I calculate that he would have a net worth between $750,000 to $1,000,000 dollars today, or perhaps even more! 

So the takeaway for me from watching his experience with money are as follows:

  1. Live below you means and don’t scale you spending up as your income increase by large bounds.
  2. Buy into investments that reduce your taxes while you are earning such a large salary… such as 401ks, IRAs (if you qualify) and other retirement options.  That way you actually save more of what you earn instead of paying the tax man.  Later when you are retired and you are in (most likely) a lower tax bracket, they will get less of your hard-earned money!
  3. Chose a practical, frugally logical spouse over one that has no clue about money.  I married a frugal accountant and that made all the difference!
  4. Pay attention to past stories about your potential mate, if they tell stories of going on elaborate vacations and still have an actually engagement ring from a previous failed engagement… These little warnings should set off loud alarm sirens in your head!!!
  5. Schedule an appointment with a fee based financial advisor!  Perhaps those third party eyes will tell you if you are on or off the proper financial road or not!

And so concludes the story of my friend that fell victim to the curse of the accidental millionaire.  Don’t let this happen to you, learn as much as you can about finances today, and work with your spouse to try and establish your financial goals, to ensure a smooth path to riches!

Readers, do you know of any accidental millionaires that were cursed to lose it all because of poor financial planning or other issues?

-MR

18 Responses to The Curse of the Accidental Millionaire

    • Ahhh, I am a good friend.

      He did get a job, but it doesn’t pay near what he was getting. I think he has a great story, and I’m trying to get him to write a book on his misadventures…

  1. That’s horribly sad. Your friend sounds like the typical “income affluent” type. Fortunately, for him there is a very high probability that he will make a large income again. Article reminds me of the importance of being responsible… always.

  2. Sadly, it’s hard for some people to live below their means because there are many who need to show the outside world they are successful. One way is having a giant diamond..to prove that you’re good enough to land a rich husband. Another is being in a certain neighborhood to prove “you’ve made it”.

    There’s a technician at work who used to be our neighbor. He actually moved to a ritsier neighborhood as soon as he got the chance. He’s always been up to his eyeballs in debt and even took out a hardship loan to buy a durango. For him, it’s all about showing others that “he’s made it”. Thank god I don’t need to prove that to anyone but myself.

    • Yeah, I’m sure the techie is a bright guy… It always amazes me when you see very bright people with good salaries living paycheck to paycheck.

      To often, we associate living paycheck to paycheck with the poor but that’s not always the case.

      I actually posted a post called “Are you too smart to be rich”, and it points out why such people make financial mistakes like your co-worker.

  3. I don’t know any high income folks who aren’t putting away their money (or rather, I probably do know them, but I don’t know their income or spending details). But I know PLENTY of middle class folks who live upper middle-class lifestyles and have debt and no savings. When layoffs happen they move in with family or friends and still keep up their spending.

    Sandy is right about how folks are proving they’ve “made it.” One of DH’s relatives was telling us about her in-law who was doing really well– new house, new cars, nice furnishings… Then she proceeds to tell us about how he got a nail through his hand and because he has no health insurance and no savings and no equity… Makes me think that no, he wasn’t doing really well. But that’s how they define really well in that town. (My in-laws took pictures of our semi-mcmansion to show everyone that their son had really made it– when we visited next everyone was talking about it. If we ever downsize that’ll be a big loss of prestige for them.)

    It drives me nuts. But what can you do?

    • I doubt that you in-laws would tell anyone if that would happen 🙂

      It always amazes me when people like the ones discussed go crazy with money…

      While I don’t use a budget because I’m frugal by nature (and my upbringing), many such people would benefit greatly by using a budget.

  4. Sounds like the typical average family who really ate it during the recession; trying to keep up with the “Joneses” living pay check to paycheck and beyond…..

    Hopefully your friend is now learning from his mistakes and investing a portion of his income toward his future and paying off his debt.

  5. It’s funny, divorce sure does reveal a lot about people financially. I have had 2 sets of friends that have divorced in the past couple years. Everyone is financially ruined, even though both couples gave the impression of affluence.

    If you spend everything you make, then you aren’t rich at all. It is sad when you think of the potential money they could have had. Sounds like a pretty shallow existence if you ask me.

    • Divorce is horrible! It’s the greatest wealth destroyer ever!!! Or at least in IMHO.

      I guess this is where a good financial education in public school would have come in handy!

      Perhaps being able to get a credit card should require a state test of some sort. That might really help!!!

  6. When I saw this post title and the first sentence in my reader, I thought you became a millionaire but didn’t realize it 🙂 and just now you accidentally found out!!!

    I think if they have a mandatory personal finance course in all the high schools and colleges, whatever you major is… people will be much better off. At least we will make less mistake I hope…

    • Unfortunately for, I’m not so lucky :)…

      I’m constantly running Excel spreadsheet “what if” scenarios, trying to optimize my finances….

      I remember having a check writing class in government, but that was it…

    • Unfortunately the studies on personal finance courses in high school find very little effect. The way they are currently implemented seems to be a waste of time and money.

  7. That’s quite a sad story. It goes back to the realization that the unexpected does happen to people. Focusing on saving for the future first, and living strictly within means, is the way to go. One can still have fun by living responsibly.

    Instead of the $500,000 new house, how about a small $250,000 20-year old house that’s big enough but not spacious?

    Instead of the BMW, how about a Honda? Maybe even a Hyundai?

    Instead of a country club membership, how about just golfing occasionally for fun.

    Instead of regular $100 dinners, how about one of those meals once a year, and eating at home (healthier) or out at modest places instead?

    All of these decisions are examples of being able to discern wants from needs. These poor ole needs, as described above, provide a quality of life than hundreds of millions of people would absolutely dream about!

    By keeping that mindset, perhaps people can survive such life events better and end up in a better spot later on.

    • All great solutions Squirreler!

      I agree (and live them personally) 100%

      The sad thing is that my friend still squanders the money he is making now. It’s a sham really.