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Celebrities Are Not Financial Role Models

June 5th, 2008 · No Comments

Recently the media has been covering the defaulted home loan on Ed McMahon’s Beverly Hills mansion worth approximately $4.8 million. Now, before I comment on Ed’s finances here are some of the most popular highlights of his life:

  • He was Johnny Carson’s announcer for 30 years (1962-92) on The Tonight Show
  • He was host of the talent show Star Search from 1983 – 1995
  • He became the well-known pitchman for American Family Publishing arriving at your doorstep to announce your winnings in the sweepstakes
  • He has co-hosted the Jerry Lewis Labor Day Telethon
  • In the 70s and 80s he helped anchor NBC’s coverage of the Macy’s Thanksgiving Day Parade

So, in essence, he’s had more career success than many folks experience in ten lifetimes. I enjoyed watching Ed on television and I like him as much as any other regular American. However, seeing this recent coverage announcing that he’s $644,000 behind on his mortgage payments on a $4.8 million house made me wonder quite a few things. (He did break his neck 18 months before the home foreclosure problem so that certainly affected his income generating ability.) According to one source, Ed was once worth $200 million in real estate holdings in Malibu, but the same source neglects to mention one key fact: how much did he owe on that real estate? At age 26, financial phenom Dave Ramsey had $4 million worth of real estate but he owed $3.5 million on it and ultimately went bankrupt. OK, back to Ed. He peaked with a potential net worth of several hundred million dollars. He was beamed into our living rooms for over 40 years. He was arguably one of America’s best emcees and announcers and co-hosts. But when you take away all the glitz and glamor and career success he’s experienced, he’s just another Joe Six-pack getting pinched in a foreclosure mess. Although his mistakes have a couple extra zeros on the end of them in size.

Lessons Learned from Ed McMahon’s money problems

  • If you have no savings, all your material possessions are useless when your income stops
  • Massive financial success in your career does not guarantee financial success managing your money (see M.C. Hammer, Michael Jackson, Mike Tyson, Burt Reynolds, etc.)
  • Relying on future income exclusively is not a financial plan (see Ed’s broken neck)
  • Having multiple divorces destroys net worth real fast

At the end of his career and life, will Ed wish that he had done things differently? Would any of us trade his life for ours? For some, the cost of a huge income is all of the huge problems that sometimes go along with that huge income.

Tags: Money

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