Ed McMahon on Spending More than You Earn

I couldn't have scripted this first quote better myself.

As a follow-up to my post Wednesday about Ed McMahon's home foreclosure as well as this morning's piece on spending more than you earn even with a huge salary comes this piece from CNN. It's a Larry King interview with Ed McMahon where Ed is asked what happened to his finances. He's quoted as responding:

"Well, if you spend more money than you make, you know what happens. And it can happen. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen. You want everything to be perfect, but that combination of the economy, I have a little injury, I have a situation. And it all came together."

Later in the interview Larry asks the following of Ed's wife, Pam:

"But, Pam, the assumption is that the McMahons are multimillionaires and multimillionaires -- how much behind are you, $644,000, right? That's what's reported? ... If you're a millionaire, shouldn't you be able to pay $644,000?"

Her response:

"I think over the years, you know, it's just a kind of a combination of maybe Ed working so hard and not kind of looking at proper management, which happens a lot. ... Because you're a celebrity, people think you have a lot more than you have. And you always want to take great care of all of your friends and your family and everybody, and you do. And you don't, and I think, you know, we didn't keep our eye on the ball. We made mistakes."

Let me translate for you:

• Ed McMahon made a fortune in his career -- a ghastly sum that could have sustained a very large number of people.

• He spent everything he made and then some. In fact, the amount he spent was well over (not just barely over) what he made. Yes, misfortune was part of the issue (the fall), but the rest of the problems were self-inflicted.

If he had managed his money correctly, he wouldn't even have to work -- he shouldn't have to given how much he made. It's mis-management plain and simple (by both him and his handlers.)

Now here's the kicker. Larry asks him why he's going public now. Ed's response:

"Well, I figured I wanted to, in a sense, speak for the million people you mentioned [facing foreclosure]. I heard that figure today and I just couldn't believe it. Anyway, the million people that now have foreclosure signs on their house, or nearby. And I just want to give them hope, give them optimism, give them some kind of guidance. Get the best corrective people you need around you. Keep working on it. Don't stop. There's a lot of people that are hard workers, did everything right, didn't do anything wrong, and all of a sudden, they're in this boat. And I speak for all of them, as far as I'm concerned."

Ok, let me be brief and to the point:

There is a set of people who are truly impacted by the housing situation because of no fault (or little fault) of their own. They bought within an affordable range, had reasonable expectation of paying off the loan, and then the world turned upside down on them. These people, I feel sorry for. But my guess is they are in the very small minority. And, this is NOT the group Ed is in.

The other set of people is one that bought too much house (more than they could afford), and now that they need to refinance, they're stuck. These are the people that are facing the problems resulting from poor financial planning and decisions. This is the group Ed is in. He's not in the "oh the market is so bad and it's the reason for my problems" group. His problems are his own doing. He simply spent more than he earned for too long and it's now caught up with him.

I still feel sorry for him -- he always seemed like a nice guy -- but let's be honest here, the problems are self-induced. And it's a whole lot easier for me to want to do something for a working family making $60,000 who bought a bit too much house than for a guy who made millions and lives in a mansion.

Comments

[My Dollar Plan]

It just goes to show that no matter how much you make, if you can't manage your money properly you're going to find yourself in trouble. I don't feel sorry for him if he bought too much house. I do feel sorry for the people facing forclosure who were led down the wrong path by people they trusted.

[Geo]

I don't feel sorry for him at all. As someone who has deferred gratification, made sacrifices to live below my means and ignored societal pressures to "go with the crowd", I feel no sorrow for Ed. He chose to impress others, live the mansion life and take whatever immediate gratification was in front of his nose just like the majority of folks who now claim "they was duped by the man."

[Matt]

At least he admitted that he made the mistake of overspending. There are other celebrities (if Jose Canseco counts) that simply let their homes be foreclosed because its in their financial benefit. In the case of Ed, I kind of feel for him since he has been ill lately and in the US that can become very costly. But with that said his problems are self inflicted and his coming out seems a bit fake in its sincerity.

[sow]

It disturbs me that people are saying that since Ed was a millionaire and is now facing foreclosure, he is to blame for his money problems; and on the flip side the people who bought "within an affordable range" and are in the same boat, the world has turned upside down on them (this happened to them).

The term "affordable range" is relative. His mansion could have been within his affordable range. But that doesn't make him a worse money manager than someone that makes a small fraction of what he does and is in the same situation. My point is that whether it is the millionaire or the non-millionaire, we are all accountable.

I disagree with Ed's statement "[they] did everything right, didn't do anything wrong". Regardless, as harsh as it sounds, people that are in this situation are there as a result of their decisions and choices. But they best thing about acknowledging that you are accountable for your actions, you recognize the power to make changes.

[mysticaltyger]

Why can't people just admit (fully and completely) they screwed up and warn others not to make the same mistakes?

I get tired of all these wishy washy half a$$ed confessions.

[Dar]

I'd be curious to know just how many people Ed supported over the years. It seems to me that one of the big dangers of being financially successful (famous or not) is that many family members and friends may come to you looking for help. It can be pretty difficult to say no or set boundaries on just how many you'll help and to what degree.

[Lauren]

Just a side note, he's 85 and was wearing a neck brace during that interview from a fall. He's older than all of my grandparents - and none of them are currently in charge of their own finances. My parents or their siblings are in charge. I agree with you that McMahon's money handlers should have had better sense, and I'm sure many of his difficulties are from decisions made in the past, but I'm guessing his age (and declining health) had some effect on this.

[Lord]

The same characteristics that made him a success are probably the same as caused these problems. He might have been a little smarter with his money and a little less successful and come out better.

[Liz]

This may or may not apply to Ed but I love this quote from Will Smith:

"Money and success don't change people; they merely amplify what is already there."

I think this can be interpreted in every sense - If you are a jerk, or kind, or charitable, or know how to manage your money or not.

[Kevin]

The fact that he's in his 80s and still has a mortgage was setting off bells and whistles when I first heard this story. There's just no reason someone like him should have any debt after raking in that Tonight Show money all those years.

[Karen]

I don't feel sorry for him. He's racked in enough money over his career and he has been working well into his 80's. ET showed his house decorated for Christmas one year and it was lavish. The man needs to learn what sacrifice means.