Question: You always answer such heavy-duty questions, I wanted to ask you something for fun. Do you know what Charles Schwab, Bill Gates, and Donald Trump have in common? Let’s see how smart you are!
— Wendy in Deleware
Howard Dvorkin CPA answers…
OK, Wendy. Let’s see how smart I am!
Without using Google, I first guessed that all three of these business leaders were broke at some point in their lives. When I did some research, I found out it was much worse than that.
While many famous people go bankrupt and claw their way back — which Debt.com detailed in this infographic — steel magnate Charles M. Schwab lived fast and died broke. He had at least one child out of wedlock, gambled notoriously, and spent lavishly. He’s estimated to have spent up to $40 million (almost $800 million in today’s dollars) on himself. He died penniless in 1939.
While the depths of his spending surprised me — he apparently built a 44-room summer estate and then decided to move the entire thing 200 feet — it’s just an extreme version of what I see too often. As the economy recovers, I expect to witness many Americans spending their new wealth as soon as they accumulate it. If there’s a lesson here, it’s to always spend wisely.
I’m not being a killjoy, either. I’m quite sure Charles Schwab’s lifestyle and enjoyment of life wasn’t significantly improved paying for his summer house to be put on rollers and moved less than a football field away.
By the way, don’t confuse Charles M. Schwab with the Charles Schwab who founded the investment firm Charles Schwab Corporation. His is a success story, overcoming dyslexia and flunking English twice in school to become a billionaire.
As for Donald Trump, that’s a story many people already know. The Donald has declared bankruptcy four times and is still a billionaire. What many people don’t know is that he’s never declared personal bankruptcy. Instead, he’s filed for corporate bankruptcy. Forbes described the differences, and Trump’s up-and-down investments, in an excellent article called How Donald Trump Made Bankruptcy Work For Him.
(If you want bankruptcy to work for you, read our Last Resort For a Fresh Start report. Often, there are other less-severe solutions to your money problems.)
How does Bill Gates fit into this scheme? The world’s richest man dropped out of Harvard and failed at his first shot at computer fame. His business partner in that venture was Paul Allen, who later made his fortune with Gates at Microsoft. But as Allen recounted to Newsweek, the two men launched Traf-O-Data, which attempted to compile traffic-flow patterns for traffic engineers.
It failed, but it led Gates to say, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
Thanks for the question, Wendy. Hope I passed!
Have a debt question?
Email your question to firstname.lastname@example.org and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.