Here’s Johnny! Ed McMahon Foreclosed Upon

Ed McMahon made news recently with an announcement that his home could be foreclosed on. McMahon and his wife, Pamela, are $644,000 behind on $4.8 million in mortgage loans and is trying to avoid foreclosure. The couple had taken out $4.5 million against the house. McMahon had this to say on CNN’s Larry King Live,

“If you spend more money than you make, you know what happens. You know, a couple of divorces thrown in, a few things like that. And, you know, things happen.”

Later on in the interview Larry King asks the question to Pamela that many were wondering.

“If you’re a millionaire, shouldn’t you be able to pay $644,000?”

Pam:

“I think over the years, you know, it’s just kind of a combination of maybe Ed working so hard and not kind of looking at proper management, which happens a lot. Because you’re a celebrity, people think you have a lot more than you have. And you always want to take great care of all your friends and your family and everybody, and you do. And you don’t, and I think, you know, we didn’t keep our eye on the ball. We made mistakes.”

McMahon also said that he wanted to be a voice and role model for the million plus people who’s homes are being foreclosed on.

Ed McMahon Foreclosure Take-Aways

• It doesn’t really matter how much you make in life, it’s how you manage what you do make. We’ve all seen these cases before: Mike Tyson, MC Hammer, Michael Jackson – celebrity millionaires gone bankrupt. The fact that anyone with tens, maybe hundreds of millions in earnings could spend more than that is mind boggling, but it does happen. Why does it happen? People become accustomed to lifestyles for which they cannot afford. It’s not much different than someone who makes $40,000 a year who leases a luxury car and plush loft condo and eats out twice a day. Can you afford these things on $40K? Possibly, but every other aspect of your financial-life better be in real good shape. If you spend more than you make, the story is never going to have a happy ending.
• Wouldn’t it be nice to have the unfortunate circumstance of coming across millions of dollars and then having to be smart with that money? It goes to show that starting early in life and teaching yourself discipline can really pay off if you do happen to come across mass amounts of money.
• As a general rule of thumb, don’t spend more than 30% of your household income on your mortgage payment.
• Don’t borrow against your home unless you absolutely have no other choice.

Other Take-Aways

• When watching the McMahon story on news outlets, the news anchor always says, “oh, I feel so bad for him.” Pitying a millionaire who spent all of his money and is being forced to move out of a $6.2 million house? I do give McMahon credit for admitting that it was poor money management on his part.
• Mr. McMahon, I also give you credit for slyly trying to drum up new interest on the home you are trying to sell, but if there’s one thing you shouldn’t do in the process it’s to let everyone know that your home had toxic mold throughout and that Britney Spears is a neighbor of yours.
• McMahon had won $7.2 million in an insurance settlement for the toxic mold cleanup on the house. The house is for sale for $6.2 million. How the heck can mold cleanup on a house cost more than $1 million more than the actual house? Where did all that money go? McMahon isn’t so clear in his explanations.
• Props to you, Mr. McMahon for having a wife who is 32 years younger than you.
• A ‘role model’ for those getting foreclosed on? I don’t think a blue collar family from Michigan who works 5 jobs is going to look to an 85 year old celebrity millionaire living in Beverly Hills, CA for inspiration. You’ve had a respectable career, but let’s be honest here.

Ed McMahon Foreclosure Discussion:

• Do you feel bad for Ed McMahon?
• What lessons do you take away from this story?

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