23 May 2016
It is a truism to remember that persons who do one thing very well does not qualify them as experts on everything, especially when it comes to money. Mark Twain’s investments in a typography machine threw him into bankruptcy. Sir Walter Scott wrote himself into four strokes to pay off massive debts from his unwise investments in his publishing house. Even William Shakespeare resorted to moving across London’s Thames to avoid a tax bill of five shillings.
Even contemporary writers have to learn that money can be a stern taskmaster. Mystery novelist Patricia Cornwell had to learn the hard way that earning millions from penning best-sellers about her coroner-sleuth Kay Scarpetta could not protect her from profligate spending.
In 1999, “The New York Times” profiled Cornwell’s way with money. She received a $6,000 advance for her first book, “Postmortem” (1990) and $20,000 for her second. But her series exploded in popularity so that in 1996 alone she earned at least $17 million.
To Cornwell, who grew up poor and worked at low-paying jobs such as police reporter and clerk, what appeared to be an unlimited bank account was a license to spend. She thought nothing of impulse-buying a $100,000 Mercedes, or $10,000 in jewelry. She built a staff of seven to help her, bought a home and land worth $3 million, and another $2 million on condos in the Cayman Islands and Hilton Head, S.C. If she needed to be in London to research her next Scarpetta, she dropped everything and flew over on the Concorde.
The energy that fueled her free-spending life and the long hours she put into her books also drove her personal and business relationships as well as a drinking habit. The pressure came to a head when, after a day of work accompanied by a pitcher of Bloody Marys and a couple glass of wine at dinner, she slammed her Mercedes into the back of a stalled van on the Pacific Coast Highway. The car flipped several times leaving her trapped in the wreckage.
The accident served as a wake-up call. For several years, Cornwell sought help for her mental problems. She learned that she was bipolar and subject to manic mood swings. She also put her finances in order by hiring money managers to exercise some restraint on her more extravagant purchases.
Many of us would wish for problems like Cornwell’s. Instead we’re faced with those like Neal Gabler. In the May 2016 issue of “The Atlantic,” the former movie critic and biographer of Walt Disney, Walter Winchell, and Edward Kennedy detailed a lifetime of terrible financial decisions that left his family in a hole so deep “we may never claw our way out of it.”
How did he get into trouble? By making bad decisions. By refusing to save in the good times and using debt to tide his family over in the bad times. By refusing to pay off his credit cards, diverting some of his income into interest payments. By using his 401(k) account to pay for a daughter’s wedding. By buying a house on the eastern end of Long Island, where prices start at a half-million for a 2-bedroom ranch.
Some of his decisions were not his fault. He tried to sell their Brooklyn co-op apartment when he had bought the house, but the co-op board rejected some of his buyers and he had to sell at a steep loss. His large book advance forced him to pay a hefty tax bill (although I wonder if he couldn’t arrange with his publisher to spread his advance over years to reduce his liability).
Although Gabler claimed responsibility for his financial decisions, he also was equally adept at blaming the economy for not growing his income “the way incomes used to grow in America” (for book writers and TV presenters?). He denied living “anywhere near a middle-class life” by the Commerce Department’s standard, which listed homeownership, a car for each adult, health security, a college education for each child, retirement security, and a family vacation each year. Judging by his essay, he might not have checked off the boxes for cars, retirement, and a family vacation, but who needs a car when the LIRR can take you to the city in 2.5 hours (a half-hour longer than by car, which they have), and one daughter went to Stanford / Harvard Med and the other to Emory and Texas (for her master’s) so she can be a licensed social worker? Doesn’t sound like any middle-class life I’ve lived.
The point is not to kick Neal Gabler, although that’s a lot of fun. His attempts to accept and evade responsibility, to be forthright about his flaws (he admits not talking to his wife about any of these issues; bet that was a fun conversation) and at the same time blame a system that was not supposed to be unfair, is awe-inspiring. High schools should use his essay to teach critical reading skills such as bullshit detection.
Instead, Gabler should stand as a model for how not to spend money. How you should get your partner involved in money discussions (assuming that they’re mature enough to handle it). To be aware that marketers are skilled at using weaknesses common to humanity — the desire for status, the need to be flattered, the shading of truth, the way it bends words so that “second mortgage” becomes a benign “line of credit” — to ensnare you in debt, to spend your future income for today’s purchases.
Think of your income this way: You have a limited lifespan. You can earn only so much money during that time, barring surprise successes. Make your purchase decisions knowing that you have to use that treasure to pay for everything. Do that, and you’ll already be smarter than Gabler.