Managing Rockefeller’s Money

John D. Rockefeller portrait, 1885

John D. Rockefeller in 1885

John D. Rockefeller’s name is etched on countless buildings in New York City, and even though he was born in the Big Apple, he made his fortune in Cleveland, Ohio where he founded Standard Oil. By the time he died, Rockefeller’s assets equaled 1.5% of America’s total economic output—about $340 billion dollars in today’s inflation—more than four times that of Bill Gates.

Cornelius Vanderbilt is known for his railroad empire, but before laying tracks he was in the steamship business. After the Civil War broke out, he offered his largest and fastest ship, the Vanderbilt, to the Union Navy. When President Lincoln asked him to name his price for the ship, he said it was donation. He had no interest in profiting from the war.

Both of these financial giants used private firms to manage their wealth. Since the 1800s, what are now known as “family offices” served the mega-rich with a buffet of wealth management services from tax planning to investment management, including managing everything from their fine art collections to the staff for the family’s vacation home. These days, there are about 100,000 U.S. families worth $5 to $10 million and they represent new opportunities for professional money managers.

Recently, DL MoneyMatters has seen an uptick in referrals from accountants and attorneys who work alongside family offices or lead investment advisors to handle the day-to-day bill-paying or tracking expenditures of family trusts. Our role is to act only in the best interest of the trust, to manage bill-paying carefully, pay bills and taxes on time, and maintain impeccable records. We can only imagine what it must have been like to manage the daily bill paying for the Rockefeller or Vanderbilt families.

Bankrupt Celebrities

What can we learn from bankrupt movie stars?

When the rich and famous lose it all, we are intrigued about what went wrong. Should we instead ask ourselves what we can learn from their financial mismanagement?

Dionne Warwick rose to fame in the 60’s with hits like Walk on By, Say a Little Prayer, and Do You Know the Way to San Jose. She won five Grammy awards, charted more than 60 singles, and had album sales over $100 million dollars. In 2013, she filed for bankruptcy at age 72, down to her last $1,000 in cash and a $10 million tax debt. Reportedly, it was the mushrooming of accumulating tax penalties and interest that did her in financially.

poor rich

George Foreman, Debbie Reynolds,
Dionne Warwick, Burt Reynolds.
Copyrights belong to the respective owners.

Burt Reynolds, the popular star of movies like Smokey and the Bandit and The Longest Yard, made his big mistake with a $750,000 second mortgage on top of a $1.2 million dollar mortgage on a home valued at $4 million. As the story goes, he woke up one morning as surprised as everyone else that he was broke. His financial troubles have been attributed to a 1996 bankruptcy after divorcing ex-wife Loni Anderson and launching an unsuccessful restaurant business. Then he remarried, divorced the next wife, and ended up with lawsuits and ensuing money battles.

There were others: Ed McMahon, George Foreman, Nicolas Cage, Johnny Unitas, Debbie Reynolds, and Michael Jackson. Going back to our early history, there were others who either lost it all or came perilously close: Thomas Jefferson, Buffalo Bill Cody, Mark Twain, and Ulysses S. Grant.

Each of these big names had problems with money management. Some spent too much, made poor financial decisions, or simply squandered the money away.

What can we, who make far less money and have far less fame that these, learn from their mistakes? Stay simple. Live within our means. Pay bills on time, especially taxes and interest on bank loans. Avoid over-investing and marry for love, not money. With simple financial discipline we can enjoy our later years in life without worrying about money.

Retirement – A Really Large Number?

Remember back in 2008 when lawmakers on Capitol Hill worked feverishly to pass a bill to get the credit markets churning again? Senate Majority Leader Harry Reid (D-NV), told reporters “I think it’s important that we get it done right, not get it done fast.” Then Senator Sherrod Brown (D-Ohio), said “If we do it right, then we need to take as long as it needs.” Nonetheless, history tells us that getting it right was not as important as getting it done. When questioned about the $700 billion figure that the Treasury would use to buy up bad debt and “save the nation from a financial meltdown”, a Treasury spokesperson said, “It’s not based on any particular data point. We just wanted to choose a really large number.”

2014 traveling SeniorsThe scary truth is that fewer seniors today have sufficient retirement savings or pensions that retiring seniors did just a generation ago. But they do have increasing expenses.

According to the NCPA (National Center for Policy Analysis), a non-profit, non partisan public policy research organization, the majority of 65 – 74 year olds have a mortgage or home equity loan, and since Washington’s big financial bailout, seniors are taking on more credit card debt. The average credit card balance for 65 – 74 year-olds in 2010 was $6,000 compared with just $2,100 in 1989. For those over 74, debt used to be so low it wasn’t measurable; by 2010 it was $4,600.

Why? Rapidly increasing costs in housing, health care, home maintenance, rising property taxes, insurance and mortgage interest, and health care.

Seniors today are also spending money on travel, new cars and trucks, and even education.

Considering these trends, experts suggest that seniors get a handle on what they are spending. They suggest making a list of what is being spent on housing, credit card debt, health care, transportation, and the like, and what percentage of the total spending all these things represent.

If you or someone you know is struggling to make ends meet each month, we may be able to help. Because we are experts in personal money management, we can suggest solutions such as putting into place a debt reduction plan, setting up a budget, or simply helping to determine how much is needed for retirement and creating a spending and savings plan to meet certain goals.

When asked about a typical senior’s spending, no one wants to hear, “We don’t have any data points, but we think it’s a really large number.”