by Abby Ellin
Monday, September 20, 2010
It's everyone's dream: Win the lottery! Sell your company for millions! Invent Beanie Babies and move to Fiji! In truth, though, instant millionaires don't quite get the joy ride they are hoping for. There may be a giddy rush of success, but the new money can also cause an enormous amount of anxiety.
In fact, when we interviewed some of the suddenly wealthy — a former flight attendant whose side business took off, a cancer survivor who won a medical malpractice judgment, a factory worker who won the lottery — we found a thread of caution running through all their responses. "I acquired a lot of friends — not by my choice," says Eric Ruthman, an inventor, investor and gambler on Long Island, N.Y. His advice to others: Change your phone number.
Read on to see his story — and those of four other overnight millionaires.
Name: Sandy Stein
Location: West Hills, Calif.
Source of wealth: The former flight attendant created a product that helps people find their lost keys
What did you buy? I bought a new Lexus convertible and paid cash for it and didn't even get a deal! I just took it right off the lot. I went on many trips and enjoyed plays, musicals, and concerts — as many as I wanted to see without feeling guilty. I even took my staff to Las Vegas for the weekend to celebrate our fifth anniversary.
Smartest thing you spent it on? A team of lawyers who have been protecting my patent from all the copycats who think it's OK to steal my idea.
Dumbest thing you spent it on? Paying full retail for my car. I have never done that before, nor will I ever do it again!
What are you doing now? I quit in 2005, after 35 years [as a flight attendant]. Now I am in the office five days a week, going to trade shows, and figuring out how to make more sales and solidify a spot in the marketplace.
Advice to others? It is fun to share your wealth with your community and friends. It is fun to spend the money on things you normally would not have spent it on, when you had limited funds. But it is even more fun to invest it wisely so that you don't have to worry what home your son is going to put you in as you get older.
Name: Eric M. Ruthman
Location: Long Island, N.Y.
Source of wealth: Sold a plastics company for $75 million — then invested early in eBay and made $14 million more
How did you get rich? I was involved in some manufacturing deals for the thermoplastics industry, invented some items and sold the company to a major player in the world of plastics — that was the base from which I started. As it turned out, my broker was engineering a great run into a new stock called eBay. It turned out to be a great deal — not only was I racking up stock and it was going to the moon — but when I realized what eBay was, I started cleaning out estates all over the East Coast , buying treasures for almost nothing and selling them on eBay. The cash flow from just that could be as much as $100,000 on little or no investment. ... I am also an avid gambler and have done very, very well for many years; some winning years have [made me] seven figures.
What did you buy? I have purchased many things through the years: a really nice boat that I spend most of the summer on; a home in Las Vegas and another in the Bahamas. I have an extensive watch collection that includes some really silly inexpensive items and some rare and cherished timepieces. I have 22 cars in my collection — the best is my little SmartCar. And I have a vast number of custom sport jackets from Versace and other designers.
Smartest thing you spent it on? The love of my life: Jenny, my Lab! She is numero uno.
Dumbest thing you spent it on? I invested some funds to help a friend establish a seafood company. I bought in hook, line and sinker (excuse the pun), and he failed. He would not take the advice of the investors he wrangled into the deal. I was not hot on the idea and should have listened to my inner voice, but a friend is a friend.
What are you doing now? I'm always up early — 5 a.m. at the latest, seven days a week. I start with televised news and printed news, spend time with Jenny, then hit the computer and TV for about an hour and tune into the world. I try to spend about three to four days in October through May at Harrah's in Atlantic City ... In the summer I'm on Long Island with the boat. I also do charity events and donate time and efforts to regional causes.
Advice to others? First, change your phone number! Then take 80 percent and invest it in solid growth-oriented funds with regular returns and minimal risk, and don't touch it for any reason. Live within the means of whatever your investments yield. Take 5 percent and go crazy with it — get it out of your system. With the other 15 percent, you can take the risk plunge into investments that may get you a nice windfall.
Finally, remember to take care of your family, friends and animals. Seriously: Give back, pay it forward, find a cause and support it. You will sleep a lot better at night.
Name: Tracy Howe
Location: Frenchtown, N.J.
Source of wealth: In 2007, Howe and her husband, Peter Kraft, sold their college-recruiting software company for a multimillion-dollar sum.
How did you get rich? First of all ... "rich" means different things to different people. To us it doesn't just mean money, it means a house full of people, animals and activity. It means a "rich" life full of things to do. We made our by money building a technology company, Goalquest, in higher education. We built it from scratch and sold it eight years later.
What did you buy? We bought a house in the Hamptons as an investment property, but we haven't gotten our money out of it yet. Fortunately, the Hamptons is as near a recession-proof location as you can get, so we're optimistic about this investment. We also bought a horse farm in Florida — we're equestrians and show "jumpers," and we participate at the Winter Equestrian Festival in Wellington, Fla. That area, unfortunately, isn't as recession-proof as the Hamptons. Not only didn't we get our money out of that investment yet, but we'll probably lose money on that one. The market in Florida is terrible. We also bought a few horses for us.
Smartest thing you spent it on? Our kids' private education. It's incredible how much we can see the positive impact the school is having on their development, maturity and confidence.
Dumbest thing you spent it on? A very expensive grand prix show jumper [horse] for our trainer to ride and then resell. That definitely did not work out the way we had hoped it would.
What are you doing now? We started a new business in social philanthropy called SequentialT. We sell sequentially numbered shirts to people around the world. Each shirt raises money for charity and counts people in to a united effort to make the world a better place.
Advice to others? Take the time to think through want you really want for the next stage of your life, and don't rush into things too quickly. With unlimited amounts of money can come impulsive behavior. I think it's important to reward yourself for your success, but then you need proper planning for creating long-lasting assets so that you never [again] have to feel financial pressures.
The Lawsuit Winner
Name: Marv Doniger
Location: Laguna Niguel, Calif.
Source of wealth: After a bout with cancer, Doniger won $3.3 million in a medical malpractice lawsuit.
How did you get rich? I was forced to retire as a result of my longtime physician failing to recognize that I had cancer. After three months at UCLA Hospital and having lost my bladder, I was released — unable to walk. I have regained the ability to walk but was unable to resume my career as a management consultant to Fortune 500 companies. After years of litigation and two trials, I was awarded $3.3 million.
What did you buy? I have acquired a car and two poodles, Will & Grace, who are my constant companions. I also set up a trust fund for my grandchildren.
Smartest thing you spent it on? Investments that I made in accordance with my previously developed financial plan.
Dumbest thing you spent it on? I did not make any dumb financial decisions because I had a financial strategy and plan to cover the financial needs of my wife and myself. I have always looked at windfalls as something to be saved not squandered. Since I am no longer able to function as a management consultant, I chose to deploy the funds so as to ensure my wife's and my financial future.
What are you doing now? Based on my experience and reflection on my own personal financial plans, I have written books on managing finances.
Advice to others? A sudden influx of money presents one with a set of choices. You can use it to satisfy near-term desires, or use it to ensure your financial future. Develop a strategy for dealing with unforeseen financial needs. And beware of those who present you with investment ideas you don't understand and don't need to achieve your financial goals.
The Lottery Winner
Name: Dave Gehle
Source of wealth: Together with seven of his co-workers at ConAgra Foods, Gehle won $365 million in the lottery in 2006. His share after taxes: about $15 million.
How did you get rich? I won the lottery!
What did you buy? A new snowblower and a new car; that's pretty much it. I still live in the same house I lived in before I won.
Smartest thing you spent it on? Travel. I went to Vietnam with another winner who was from Vietnam. He was being shot for a movie about lottery winners. I've also made some investments.
Dumbest thing you spent it on? To be honest — I haven't, really. I've been really careful. I guess I'm still kind of overwhelmed.
What are you doing now? I try to help out around town — I shovel snow for my neighbors and plow in the winters. For a while after I won I stayed at my job at ConAgra, but I finally quit.
Advice to others? Be really careful; be frugal. Don't blow it all. Invest. It's really tempting to spend it all. Don't.