When I read the recent news that boxing superstar Floyd Mayweather—one of the most accomplished fighters in history (and one of the richest)—was suing his former TV partner, Showtime, for $340 million, it got me thinking: does Mayweather, who reportedly made more than $1 billion during his career, need the money?
Those Mayweather-is-about-to-be-broke rumors have been swirling for years. That apparently is why Mayweather, who should have created true generational wealth during his 21-year career, has taken part in boxing/kickboxing/influencer exhibitions in recent years. And soon after he filed the lawsuit against Showtime, he announced he would unretire from boxing at the age of 49, leaving observers to think, “Yeah, he must really need the money.” That was seemingly confirmed by this Business Insider report saying that the IRS is looking to collect an unpaid $7.3 million from Mayweather.
And that got me to thinking about the 2012 documentary, Broke, which featured professional athletes from a variety of sports who made millions (or hundreds of millions) of dollars and then eventually lost it all.
Of course, it’s not only uber-rich athletes who can’t handle their money and end up declaring bankruptcy. It’s financial gurus and business leaders and movie stars, and, gulp, even doctors and other high-income professionals you might know. It's a scary prospect, but it also can be avoided.
Today, let’s examine a few cases of people who had tons and tons of money and then lost it, and see what we can learn from their mistakes. Sure, most of us won’t have nine-figure portfolios, but these money management lessons can be learned by all.
The Mega-Rich Who Lost Their Money
Boxing Superstars Floyd Mayweather, Manny Pacquiao, and Mike Tyson
Floyd Mayweather and Manny Pacquiao will be linked together forever because they were the two best boxers of their generation and because their 2015 fight reportedly netted them at least $300 million combined.
Business Insider reported last year that Mayweather, who made more than $1 billion in earnings, has a boxing ring full of debts and that multiple of his commercial real estate deals have gone sour. He’s also been sued several times for failing to make good on debts he owes, and he’s paid the IRS millions in back taxes. He’s also big into sports gambling, and though he often posts his huge winning tickets, he almost surely doesn’t let fans know about his (what I assume are major) losses.
People close to Mayweather say he’s not experiencing money problems, but his actions of late lead many to be suspicious.
The rumor mill also has had its eye on Pacquiao and his alleged money problems for years. He’s also taken part in money-rich exhibitions, and he continues to fight at the age of 47 (to be fair, he’s still a world-class fighter). He’s had tax issues in the US and in his native Philippines that have drained tens of millions from his winnings, and he’s known for being overly generous with the people around him and with perfect strangers.
Here’s what Deadspin wrote in 2013:
“According to a 2009 New York Times article by Greg Bishop, ‘Team Pacquiao has perfected the art of dysfunction. The entourage consists of trainers, assistants to the trainers, advisers, assistants to the advisers, cooks, dishwashers, car washers, publicists, gofers, and security.’ For each fight, Pacquiao also spent hundreds of thousands of dollars flying his entourage to Las Vegas, buying hundreds of tickets, covering hotel rooms, and providing spending money.
In the Times article, Michael Koncz, singled out Pacquiao's Achilles' heel: ‘The downfall of Pacquiao, if there is one, will be his kindness and generosity. At some point, I fear that's going to catch up to him.’
Beyond Pacquiao's generosity, he reportedly squandered millions from gambling. That doesn't even account for his fleet of cars and extensive property holdings, including houses, condos, apartments and such an intense desire to give his money away to the poor he had to hire people simply charged with the responsibility to apologize and prevent him from throwing money at all the open hands spread out before him.”
As for Mike Tyson, who earned a reported $430 million during his career before declaring bankruptcy in 2003, he owned multiple mansions (including a 21-bed, 25-bath house in Connecticut), bought millions of dollars worth of cars, and spent hundreds of thousands of dollars a year on exotic pets.
My take: Athletes live such different lives than most of the rest of us. They have to pay taxes in many locations throughout the year, and they have to find the right people who won’t rip them off and/or slowly siphon away all of their money. Financial education is key. Most athletes don’t ever receive it when they’re in their primes. At least doctors don’t start making big money until they’re a little older and wiser and when, hopefully, they’re in a better mental and emotional space to handle it. But if you continue your financial education during the accumulation and decumulation phases of your investing career, you'll be in a much better spot than many of the people on this list.
Mark Twain
Yes, Samuel Clemens knew how to make money writing, and he married Olivia Langdon, a wealthy coal heiress whose father gifted them on their wedding night a mansion that included servants, a carriage, and a coachman.
But by Twain’s own admission, he couldn’t stop gambling on late 19th-century startup companies. And he couldn’t stop losing on those gambles.
As Time wrote,
“Mark Twain was a great author—but a stupendously incompetent businessman. He lost money on an engraving process, on a magnetic telegraph, on a steam pulley, on the Fredonia Watch Company, on railroad stocks. He once turned down a chance to buy into Bell Telephone even though he had one of the nation’s first residential phones.”
Twain/Clemens eventually filed for bankruptcy after owing $80,000 (close to $3 million in today’s dollars), but he paid it all back after going on a long, worldwide speaking tour. As Twain later said, “Most of it was lost through bad business. I was always bad in business.”
My take: I’ll let Twain take it from here, several years after he bottomed out financially: “There are two times in a man’s life when he should not speculate: when he can’t afford it and when he can.” We talk all the time on this website about how, if you want to speculate, make sure it’s a single-digit percentage of your portfolio. If you want to try making money at crypto, precious metals, angel investing, or baseball card collecting, that's fine. Just take it easy. Otherwise, you might have to ride a raft down the Mississippi River to avoid your creditors.
Some Average People Who Got Big Inheritances
These two anonymous quotes came from a Buzzfeed piece aggregating a bunch of answers to a viral Reddit post on how ex-millionaires lost all their money (and yes, I’m aggregating the aggregators).
“Long story short: I inherited a whole lot of money from my parents, but didn't know what to do with it. I was 23 with a big ego and a stubborn attitude. I adopted a lifestyle where I was constantly inebriated and blew the money like it was nobody's business, trying to buy happiness and friendships. The money ran out before I knew it, and it haunts me every day.”
“I dated a guy who unexpectedly inherited $6 million. His parents had been killed in a drunk driving accident when he was a baby, and so their life insurance and money from a legal settlement sat in an account collecting interest for 18 years. He got a call from a lawyer on his 18th birthday, and that's how he found out about it. He went nuts. Every time I saw him, he had a new car. He bought an extravagant house and insisted on taking these big vacations. He would go to our local comic shop and buy EVERYTHING. His spending was a major factor in why we broke up. It was all too much, watching him blow through money like that. He didn't invest any of it. He blew through all his money in five years. Last I saw him on Facebook, he was destitute.”
My take: Stories like these show why estate planning and truly thinking about the effects of Economic Outpatient Care on your children are so key. Also, this is why building generational wealth can be so difficult.
Sam Bankman-Fried
Remember the FTX founder who amassed a fortune of $26.5 billion in 2022? Yeah, he’s serving 25 years in prison now after the cryptocurrency exchange’s collapse.
My take: Try not to commit fraud.
If you ever find yourself with tens of millions of dollars (or maybe even nine figures) in your bank account, know that it is possible to lose it all. Here’s how one physician worth about $50 million told WCI in 2023 about how they live their life: “Despite the extreme level of wealth, we like to live like a successful doctor family, not like the Kardashians.” Sounds like solid advice to me.
More information here:
Financial Gurus Who Have Gone Broke
Physicians, Bankruptcy, and What to Do If You’re Stuck There
Money Song of the Week
A few months ago, our local Broadway Series brought The Great Gatsby to town, and while the original Broadway production received mixed reviews, it was difficult not to be wowed by the costumes, the set pieces, and the dancing. I had reread the book a few months earlier for the first time since high school, and I realized, “This book is actually pretty funny, but there really isn’t much of a plot here.” But that didn’t stop me from having fun at the musical.
That was particularly true during the song New Money, where Nick Carraway is introduced to the concept of Jay Gatsby’s summer parties that included plenty of Charleston dancing and a fireworks display that looked like New Year’s Eve in June. As the ensemble sings,
“New money/Young, rich, and wild/Reveled, reviled/Don't you want that new money?/Fillin' your pockets/Spend it while you got it.”
Here’s the Original Broadway Cast recording.
But you should also check out this video to see part of the spectacle of the performance.
We know that one of the main ideas of F. Scott Fitzgerald’s book was how the excesses (and the vapidness) of the rich during the Roaring '20s still couldn’t offset their unhappiness when their relationships crumbled and when their expectations of what life could be like fell far short. We also know that you could be bleeding out in the pool from a gunshot wound, all alone as you experience your life expiring, and the party will simply find another place to restart.
New money (or old money) couldn’t stop that from happening.
More information here:
Every Money Song of the Week Ever Published
YouTube Short of the Week
One of these days, I’m going to write an entire column about stand-up comedians riffing about money. Until then, this was some good crowd work from Jeff Arcuri learning about the joys of retirement.
What do you think? What other takeaways are there for the mega-rich who lost it all? Are there other blatant examples from which we can learn?