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Big Money: Why People Blow It

I've spent much of my life wondering why people who can handle a monthly paycheck will turn around and blow a large sum when they get the chance.
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Money, get back.
I'm all right jack, keep your hands off of my stack.

-Pink Floyd

Kathy Trant received several million dollars after her husband was killed in the September 11, 2001 attack on the World Trade Center. She called it “blood money” and ran through the millions, spending it on such things as shoes and trips. Jack Whitaker won $290 million in the Powerball Lottery jackpot. A few years later he claimed that he had been cleaned out.

Mike Tyson made hundreds of millions of dollars as a boxer, but filed for bankruptcy. Michael Jackson’s money woes are documented. Donald Trump has been close to the edge several times. Many people with big money have a problem holding onto it.

I've spent much of my life wondering why people who can handle a monthly paycheck will turn around and blow a large sum when they get the chance. I’ve gotten some insight about that question from a book in an unrelated field, Michael Pollan’s In Defense of Food.

Pollan discussed why we have a hard time with the fructose corn syrup that is hidden in many of our foods. He said, “human bodies that can cope with chewing coca leaves cannot cope with cocaine or crack, even though the same active ingredients are in all three. Cocaine and crack hit the body too fast for the body to process it. Big money works the same way.

When money comes too fast or in too large of an amount, it can overwhelm people. It has been said that 90% of people who receive a large sum of money will blow it all within five years. Lottery winners are most likely to run through a sum of money. Unlike someone who receives an inheritance or who built a business, they don't have preparation time to get ready for sudden money. I've watched numerous lottery winners’ interviews and they all say they are going to give money to charity and help society. A few months later, you read about them getting arrested for drunk driving. A couple of years after that you hear about them living in a storage unit.

I’m sure some give substantial money to charity. But I’m willing to bet that the percentage of lottery winners on the police blotter is higher. After 27 years of working with people with big money, I’ve come to the following four conclusions:

1. You can't pick your relatives but you don't need to subsidize them.

I run into a common problem of injured people: their families.

Many injured people have incredibly giving and caring families . I’ve also seen behavior that would make your blood boil. You would be stunned at how many people want to “borrow” money from an injured relative. Love does not mean buying all relatives Cadillacs. Or even a clunker. Money coming to injured people is to compensate them for their loss. Many will probably never work again. Many have large medical bills. They need to put their own needs in front of Uncle Charley. When the money is all gone, and a family has been torn to pieces, you can usually find that "lending” money to a relative was at the root of the problem.

2. You can pick your friends. Pick them wisely.

If there is one personality that I don't understand, it's that of a professional hanger-on. Professional athletes call them "the posse." Like the crew that used to hang around Michael Vick.Hangers-on have one common trait: No money. They need to be subsidized by their sponsor. They probably don’t have lot of self-respect. You can’t hold yourself in high esteem if you are a professional ass-kisser.

I wonder about the morals of people who chose their friends and romantic liaisons by the size of their prey’s wallet. I told a lottery winner, "You just became the best-looking woman in your city." (Not to be mean, but she did not exactly resemble Scarlett Johannson). She understood what I meant. Guys were coming out of the woodwork. Fortunately, she was able to steer clear from "fortune hunters." She eventually married a man of similar means. It’s said that most of people's friends’ incomes are within 15% of their own income. That makes sense.

If you have the money to go skiing in Vail and your friends can't afford to buy a soft drink at McDonald's, you are either going to subsidize them or not do things that your wealth would allow you to do.

3. Set up systems to control the your cash flow.

You want money coming in to add comfort instead of giving a rush like crack. I've found the only successful methods are when people receive monthly income, such as from an immediate annuity, or with a trust with restricted access to principal. I've seen a lot of other methods and I’ve seen very few of them succeed.

Almost all entertainers and professional athletes have agents and money managers. Many have systems in place to keep their clients out of financial trouble. Sports Illustrated had a fascinating story about one of my favorite baseball players, former Cincinnati Red, and now Texas Ranger, Josh Hamilton. Hamilton’s substance abuse problems kept him out of baseball for years. But after he found Jesus, Hamilton became a major league all-star. He goes everywhere with “special assignment” coach, Johnny Narron, whose special assignment is to make sure that Hamilton stays away from temptation. The one day this year that Hamilton was out on his own, he immediately got in trouble. With Narron in place, he has stayed out of trouble since then. There are many people who need a Johnny Narron in their lives.

4. Use your money to make the world a better place.

I’ve been reading George Foreman’s new book, Knockout Entrepreneur. Foreman’s tale is a fascinating one. He was the heavyweight boxing champion in the 1970’s, made millions of dollars but was really a mean jerk.

He had a religious experience and changed his life. After several years, he came back to boxing to support his church. His “nice guy” persona now shines through and he has made millions with his George Foreman grill and other endorsements.

A lot of super wealthy people, like Warren Buffet and Bill Gates, are giving the vast amount of their fortunes to charity.They recognize that big money can have a big, long-lasting impact. Giving back is much better than spending it on booze and strippers.

Don McNay, CLU, ChFC, MSFS, CSSC is one of the world's leading authorities in helping injured people and lottery winners deal with complex financial issues. McNay is also an award winning, syndicated financial columnist and Huffington Post Contributor. McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983. The company's primary office is in Richmond, Kentucky. McNay has Master's Degrees from Vanderbilt and the American College and is in the Eastern Kentucky University Hall of Distinguished Alumni. McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery. You can write to Don at or read his column at You can reach him on Facebook at and on Twitter at McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.