Jackpot: $6.7 million, $335,000 each year for 20 years.
When Tallmadge was 29, he became the biggest winner in the Pick lottery at the time."
...
"Last year, while battling the Internal Revenue Service over back taxes on his lottery winnings, he filed bankruptcy to save the smaller house he had left. He is a stay-at-home dad again and plays the Florida Lottery every week, betting on those same numbers that struck it big in Arizona."
This happens all the time. Some people just can't handle money.
PorkyJohnston
Member
posted: Jul. 16, 2006 @ 8:21p
Total lack of discipline.
If he would have kept his job for 3 years, he would have had 1 million in winnings saved.
He could have easily achieved a 7% return on that money, and lived on a portion of it plus his earnings ($50 grand plus salary).
He could have kept adding the $335,000 per year to his investment portfolio.
So, while not dipping into the principal of the winnings, he could have lived off the income stream, and invested a portion of some of that income stream plus his earnings, into his portfolio.
With compounding interest returns, he could easily be worth 100 million after 20 years, and still have had a decent income for each one of those 20 years.
If he would have kept his job for 3 years, he would have had 1 million in winnings saved.
He could have easily achieved a 7% return on that money, and lived on a portion of it plus his earnings ($50 grand plus salary).
He could have kept adding the $335,000 per year to his investment portfolio.
So, while not dipping into the principal of the winnings, he could have lived off the income stream, and invested a portion of some of that income stream plus his earnings, into his portfolio.
With compounding interest returns, he could easily be worth 100 million after 20 years, and still have had a decent income for each one of those 20 years.
For giving out financial management advice you sure don't know what you are talking about if you honestly think the taxes on $1,005,000 is $5,000.
indi3
Greedy Member
posted: Jul. 16, 2006 @ 8:44p
if he was a little smart, the most he had to do was put all of the money he had left after taxes into a Emmigrant direct account and after the taxes on his interest, he would still be living off 89,000+ a year and that number will grow each year. He wouldnt have to work a day in his life.
a little bit smarter, not buying shell gas stations and buying a franchise hotel.
he actually made some great investment decisions along the way, just bad planning.
if he kept those 2 beach houses in CA they would probably be worth more than the 6.7 million jackpot today. he could have maintained residency in another state.
sounds like another good example of refusing to consult professionals in big $$ transactions ( a problem all too common in this forum)
PorkyJohnston
Member
posted: Jul. 16, 2006 @ 9:12p
AnalyticalDave said: PorkyJohnston said: Total lack of discipline.
If he would have kept his job for 3 years, he would have had 1 million in winnings saved.
He could have easily achieved a 7% return on that money, and lived on a portion of it plus his earnings ($50 grand plus salary).
He could have kept adding the $335,000 per year to his investment portfolio.
So, while not dipping into the principal of the winnings, he could have lived off the income stream, and invested a portion of some of that income stream plus his earnings, into his portfolio.
With compounding interest returns, he could easily be worth 100 million after 20 years, and still have had a decent income for each one of those 20 years.
For giving out financial management advice you sure don't know what you are talking about if you honestly think the taxes on $1,005,000 is $5,000.
You don't even make any sense.
Where did you even come with a figure of $1,005,000, and when did I use it?
CleverNickname
Member
posted: Jul. 16, 2006 @ 9:20p
PorkyJohnston said: AnalyticalDave said: PorkyJohnston said: Total lack of discipline.
If he would have kept his job for 3 years, he would have had 1 million in winnings saved.
He could have easily achieved a 7% return on that money, and lived on a portion of it plus his earnings ($50 grand plus salary).
He could have kept adding the $335,000 per year to his investment portfolio.
So, while not dipping into the principal of the winnings, he could have lived off the income stream, and invested a portion of some of that income stream plus his earnings, into his portfolio.
With compounding interest returns, he could easily be worth 100 million after 20 years, and still have had a decent income for each one of those 20 years.
For giving out financial management advice you sure don't know what you are talking about if you honestly think the taxes on $1,005,000 is $5,000.
You don't even make any sense.
Where did you even come with a figure of $1,005,000, and when did I use it?
I'll answer for him, you said....
"If he would have kept his job for 3 years, he would have had 1 million in winnings saved." You even quoted yourself saying it.
SUCKISSTAPLES said: he actually made some great investment decisions along the way, just bad planning.
if he kept those 2 beach houses in CA they would probably be worth more than the 6.7 million jackpot today. he could have maintained residency in another state.
sounds like another good example of refusing to consult professionals in big $$ transactions ( a problem all too common in this forum)
Sorry, but Escondido is not next to the beach, maybe a 30 min drive. According to another article he did live on water front property in Encinitas. If he still had the properties from 20 years ago I am sure it would be worth lots of money today.
decades
Senior Member
posted: Jul. 16, 2006 @ 9:46p
This guy lived near where I grew up . What an idiot.
Jackpot: $6.7 million, $335,000 each year for 20 years.
When Tallmadge was 29, he became the biggest winner in the Pick lottery at the time."
...
"Last year, while battling the Internal Revenue Service over back taxes on his lottery winnings, he filed bankruptcy to save the smaller house he had left. He is a stay-at-home dad again and plays the Florida Lottery every week, betting on those same numbers that struck it big in Arizona."
Except that unless he literally put it in his matress it still would have propogated into the economy regardless of whether he spent, saved or invested...
dweick
Senior Member - 1K
posted: Jul. 16, 2006 @ 11:46p
decades said: This guy lived near where I grew up . What an idiot.
ToHellWithUGA said: LOL, the picture in this article says a lot.that report was even better. Details a lot of mistakes on his part.
and it says though he expected to make 10k per month profit per station, he was still making 2-5k per station. obviously 8-20k per month profit couldnt support his lifestyle
Luniz97 said: i say he should have blown it on strippers Jack Whittaker Like Jack did? Won $315 Million then all down hill "It started in August 2003, when Whittaker had $545,000 in cash and cashier's checks stolen from his SUV outside a strip joint called the Pink Pony. His image as a drinker, gambler and carouser was established."
CoffeeEater
Greedy Member
posted: Jul. 17, 2006 @ 8:22a
I hope to be like this guy one day.
It's always been my dream to win the lottery and then quickly blow all of the money.
DBTZ
Senior Member - 2K
posted: Jul. 17, 2006 @ 8:49a
anyone read the novel "the winner" some guy was fixing the lottery and the only way they figured it out was bec 9 out of 10 winners file bankrupcy within 10 years, and only those guys that had fixed the lottery werent. give the money to use FWers and we'll spend it wisely, no??
Dracolith
Senior Member
posted: Jul. 17, 2006 @ 8:49a
The major mistake: "In 1998, he decided to cash in the rest of his lottery payments through a private company, buying an even bigger waterfront home and investing millions in four Shell gas stations."
The "private company" probably took a substantial percentage of his winnings right out, for such a lump sum cashout.
The only thing worse he could have done would have been to take out a few million in loans and credit card debt.
Winning a few million bucks doesn't suddenly mean you're God, or you can ignore mathematics -- particularly not when you're making big purchase decisions.
I would move that Lottery winnings be held in trust and contingent on obtaining an appropriate financial education or hiring a competent advisor... prior to releasing the full sum.
Dracolith said: I would move that Lottery winnings be held in trust and contingent on obtaining an appropriate financial education or hiring a competent advisor... prior to releasing the full sum.
That's the same as refusing the lump sum option and going for annual payments.
If I ever win the lottery (doubtful because I never buy tickets), I'd probably go for the lump sum option because I would not trust the government to honor their commitment if they ran short of money.
This guy made some bad business decisions but on the whole he wasn't that irresponsible with his money. It took him 15 years to blow through 6.7 million dollars. He bought real estate, and gas stations - which would have worked out fine if they were wise investment decisions. But they weren't. There has to be many many investors out there that lost millions on bad investment decisions.
SUCKISSTAPLES said: and it says though he expected to make 10k per month profit per station, he was still making 2-5k per station. obviously 8-20k per month profit couldnt support his lifestyle
Yep. Notice how he bought stuff, and when it didn't work as planned, he bought more stuff. Clear lack of due diligence, and simply repeating the same mistakes. No attempt to work at what he had and fine tune it.
Unrelated... the guy is 43 and looks like he's in his later fifties. I wonder if his pharmacist wife has been giving him pills under the counter - he looks awful.
I think that winning the lottery doesn't change people, it just allows those that who already squander their paychecks to live larger while the thrifty people are a little more secure.
He's a house-husband raising 3 kids, that might have something to do with it.
If Tallmadge read the thread here about the major risks of owning a gas station, he might've thought twice about investing in them. He could have started with just one station and get the feel of the business. Shell sold the idea to him so well that he bought four which used up the rest of his winnings. That's like putting all your money in one, single stock.
BankofGreed
Greedy Member
posted: Jul. 17, 2006 @ 10:23a
Im fascinated by stories like this. I always thought of the lotto as the poor man's IRA, and probably the worst thing that could ever happen to someone.
EricGo
Senior Member - 2K
posted: Jul. 17, 2006 @ 11:02a
BankofGreed said: Im fascinated by stories like this. I always thought of the lotto as the poor man's IRA, and probably the worst thing that could ever happen to someone.I vaguely remember that ~ 70% of lottery revenue is returned as ticket winnings on average.
Some savings account. And that is ignoring opportunity cost and inflation !
EricGo
Senior Member - 2K
posted: Jul. 17, 2006 @ 11:09a
I read one of the articles. Lots of missing details. The two snippets that caught my attention:
1. He bought a station with a ONE YEAR LEASE. <<shudder>> 2. He sold his annuity for a pile of cash. I didn't see how much that cost him, but I bet it was lot. Considering that he could have used the annuity as collateral for a sweet business loan likely tied in with tax benefits, that was a truly stupid move.
Most interesting, the guy is an engineer. He seems to have left his brains at the door.
You'd be surprised. Many intelligent people lack basic finance skills.
There's also emotion-driven decision making that can sometimes override common sense.
SlimJr
Senior Member
posted: Jul. 17, 2006 @ 11:30a
EricGo said: Most interesting, the guy is an engineer. He seems to have left his brains at the door.
I am working on my PhD and I intern at a place where the least education most people have is a Masters in engineering. I am amazed at these peoples' analytical and mathematical capabilities in the lab yet it doesn't translate into private finance.
One night at dinner with a group of about 10 engineers I made a remark about how stupid it was to pay regular credit card interest. Even though out of this group all of their salaries were $65,000-$110,000 and the cost of living was not that high, at least 4 out of the 10 admitted to having debt and possibly more could have but were too embarassed.
Also I wanted to say that these people did not have personal tragedies, illness (although even if they did they had excellent health care), etc. I can understand how some people get caught in circumstances but this was not the case.
The type of person that would buy lottery tickets is making a poor investment decision from the beginning. It is unsurprising that they would also make poor investment decisions if they happened to win. It is a personality type.
My office is opposite, we are all engineers but are freakishly frugal.
GazerOne
Member
posted: Jul. 17, 2006 @ 11:52a
Its ironic that its the people who have no sense of financial planning end with winning the lottery and related windfalls. People (like in this forum), who seem to have best ideas on how to make "proper use" of such a windfall, don't seem to winning much.
Guess its time to become daredevil gamblers and pour the savings in the lottery
I think that winning the lottery doesn't change people, it just allows those that who already squander their paychecks to live larger while the thrifty people are a little more secure.
"Twice a week, Kerry drives to the Arizona Lottery office in Phoenix to buy his weekly allotment of $100 in lottery tickets. "
That's alot of tickets a year
Skipping 62 Messages...
SlimJr
Senior Member
posted: Jul. 20, 2006 @ 9:20p
Prospect888 said: SlimJr said: PhrugalPhan said: How do you guys estimate how many tickets are being purchased?
First, subtract the projected jackpot from the carryover jackpot. Second, figure out how much each ticket contriubtes to the jackpot. Third, divide the first number by the second number.
Well yeah, but the magic is the second step and projected doesn't always turn out to be very accurate. It is very difficult to find true examples where once you account for multiple winners and taxes that you can come out ahead statistically.
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