Medicated Money

Monday, June 05, 2006

You've Got To Be Kidding Me, Right?

On our flight home from San Francisco this past week, I was sitting in my seat, listening to the iPod, and began to read an article in the June issue of Money. Half a paragraph in, I stated rather loudly, 'Ladies and gentlemen, Tyler, TX has found its village idiot and his name is Don Cruz.' Not realizing how loud I said it, I got a 'Are you crazy?' look from Mrs. Medicated. Trying to play it off, I finished the article without saying another word even though inside I was screaming at the subjects of the article.

One Family's Money is a monthly article that Money prints that tells the financial story of a certain family, their problem, and then offers advice on how to fix the problem. The month of June's family is quite interesting.

Long story short, Don Cruz and his family win the HGTV's annual Dream Home Sweepstakes and all of its glory. In short, Don & family won $250,000, a $51,000 GMC Denali SUV, and a gigantic, fully furnished mansion estimated at 2.5 million dollars. All in all, they hit the jackpot. Just in time too, for this family of 3 who currently do not have a substantial income due to a work-related injury for Don and a back-to-school student in Shelly, Don's wife. This winning will allow financial security for Shelly to finish school, pay off their house, and set them up for financial stability for life. Unfortunately, Don and Shelly are not the sharpest tools in the shed.

Instead of selling the house and profiting a cool $2.13 million dollars, this family's financial future is going down the drain fast. Don and Shelly decided to keep the house, purchase a few more cars (they have 7 in total), and live off the $250k and in the mansion because it is their life long dream to live in a large house. Unfortunately, they refused to accept reality and realize that a 6,000 sf mansion will cost a pretty penny to maintain. One year later, after $2,900/month housing expenses, $7k/yr insurance, and $1,000/month on car maintenance they are barely treading water. Oh yeah, add in the fact that they decided to keep the house they previous lived in located in Illinois for an additional $1k/month mortgage. At this point, any reasonable person would realize: sell the damn house, cut your lost, and invest what is left. No, not these people. They go on to spend $11k to fix a boat that gets little use, $6k for a dog run for their dogs, weekend entertainment bills running $1k a pop for family and friends, $40k to charity (for the tax write off, I guess), $5k on Christmas gifts for the 3 of them, $2k for scuba lessons, and $2k on a go-kart (go, speedracer, go).

What's left from the $250k, oh, about $36k. And to top things off, they have not paid any of their 2005 taxes. That little bill is just a small $672k. Unfortunately for the Cruz's, the dream of a lifetime in winning the sweepstakes has become a living nightmare.

Even with the terrible decision making, the family should still benefit from the winnings. Best case scenario, they walk away with $1.6 million. A more realistic outcome will be walk away with $1 million. This should allow the family to live off $50k to allow for Shelly to complete school, and then be able to allow the investment to grow. Worst case scenario, they walk with $250k. If this happens, say goodbye to both houses, future school ideas, and back to the daily grind actually worse off then started. Even with the best case scenario, it is nowhere close to the $2.2 million if they sold the winnings and investing the profit. Unbelievable how people who come into good luck make the dumbest decisions. This family could have been set for life if they would have continued to live a normal lifestyle. Instead, they convince themselves that they deserve everything under the sun and fail to realize that the well would eventually go dry. Worst is what they have taught their son about financial responsibility. I can understand splurging a little of the winnings, but to walk away with (best case scenario) half of what you could have had is just plain ridiculous. Situation like this always amazes me to see how fast people change their attitude from humbled to a sense of entitlement.

The best part of the article is in the last paragraph, though, when they say Don is watching this year HGTV's winner, Donald Cook, on his big screen TV. In a interview, Donald Cook tells the TV world, 'The house is absolutely gorgeous, first class! But I'm not in a (financial) position to live in a $2 million house!' Well said, Donald, well said!

3 Comments:

  • I know exactly what you mean. I read that article and didn't know whether to laugh or cry.

    I feel the same way about a lot of the "Extreme Makeover" houses. I know they do some legal things that should prevent the homeowners from having huge tax bills. However, I'm really puzzled about the logic behind building a half-million dollar home in the middle of nowhere, or in a run-down, crime-ridden neighborhood. The owners will never be able to sell them for anywhere near what they would be worth in a nice neighborhood, and they will often be a maintenance burden for them.

    By Blogger HoustonHedonist, at 6:38 PM, June 05, 2006  

  • It gets worse. Much worse! The Cruz family found themselves with a million dollar loan (home equity?) and decided to celebrate in style. Guess they like living on the edge. It's so sad. They are in such denial about their debt. Hmmm...we owe soooo much money. Let's get a million dollar loan. Yea, that'll fix everything. Here are some photos from their celebration party (posted on the HGTV site)
    http://www.picturetrail.com/gallery/view?p=999&gid=10112708&uid=3255816

    By Anonymous Anonymous, at 11:48 PM, June 30, 2006  

  • They were receiving donations also from people on the HGTV message board when they first moved in. They play the feel sorry for me card. They try and give as much interviews as possible maybe thinking someone will feel sorry for them and give them the money to bail themselves out. This is a great example of why dumb people that win lots of money or homes lose it all.

    By Anonymous Anonymous, at 10:47 AM, July 12, 2006  

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