Windfall Psychology: The Challenge of Overnight Riches

As the contract Texas correspondent for Money magazine from 1983-1997, I did a lot of research and writing about investing and other aspects of personal finance. And, as the Houston contract correspondent for The National Law Journal during those years, I also encountered many tales of legal wrangling over riches won and lost.

So, in 1991 I relied on my financial and legal sources to help create an article about the related subject of windfall psychology—how regular people handle the rewards and challenges of suddenly finding the pot of gold at the end of some rainbow.

This was the result, published in the December 1991 edition of Houston Metropolitan Magazine. I haven’t been able to update on any of the individuals profiled then, although I do know at least one of them has died. If anyone reading this post can contribute an update, the comments section is there for your consideration. I think the fundamental experiences and emotions shared in this story still reveals a cautionary tale about what might happen when YOU receive your windfall.

BE CAREFUL WHAT YOU WISH FOR

Most of us have dreamed of coming into a fortune. For these people, their dreams came true and then their troubles began.

Once upon a time she was a millionaire—for 14 months. Her name is not important now and she’s nowhere to be found. But her story bears repeating, and her boss—a Houston professional who wants to remain anonymous—remembers it well.

“She just came in one morning about 10 years ago and quit,” he recalls. “She said she'd inherited a million dollars and didn't need to work anymore. A million dollars! Imagine that! I tried to help her and told her to be patient but she wouldn’t listen. She was gone.”

He ran into her 14 months later on a street comer where she asked him for a job.

“She said she had spent it all and had nothing but her clothes,” says the woman’s former boss. “I asked where it had gone and she said she wasn’t sure. She had bought new cars for a couple of boyfriends. She’d bought another new car for herself after her first new car was stolen. She’d bought all kinds of things and spent a million dollars in little more than a year.

“But you know, she really wasn't depressed about it,” he says. “She didn't have it long enough for it to make much of a difference. Her attitude was like, ‘No regrets.’ She hosted a year-long party and the party was over.”

Who among us hasn't wished at one time or another for a windfall? And who among us hasn't heard stories like the one above, wondered if they were true and smiled smugly that the same sort of misfeasance could never happen to us? Lord, it wouldn't have to be a million. Maybe some long-forgotten uncle could die and leave a few hundred thousand dollars. How about some contest or poker game that would generate enough to retire those debts and start anew? Some of us might even welcome a little accident without much pain or permanent injury, after which an insurance company would cough up enough to make the litigation disappear.

In Houston it happens more often than you know. From time to time, of course, you read about such things in the newspaper and see pictures of the fortunate recipient grinning from ear to ear. Afterward, however, you hear little more. And there are dozens of people whose good fortune never makes the headlines. Some of them are still around. There are threads of continuity throughout all of their stories.  They all saw their windfall as the end of their troubles. In reality, it turned out to be just the first step in a new and uncertain journey. Some have managed to make it work; others have blown it and wondered why. Nevertheless, along the way they all learned some universal truths about people, money and even themselves.

“Money is a tremendous responsibility,” says Mike Robertson, a first vice president at Dean Witter Reynolds, Inc. “For many people, getting a windfall can be like going out to run a marathon when you haven't been jogging for a long time. You'll drop dead.”

While handling accounts for several clients of personal-injury attorneys, Robertson has seen many sides of windfall psychology. He’s personally escorted blue-collar millionaires on shopping sprees to The Galleria, hoping it would help them exhaust the urge to spend before it seized full control. He’s counseled windfall recipients and helped them devise a budget after carefully inspecting their homes and possessions to determine their needs.

He knows a family that saw $350,000 dwindle to just $25,000 in four years, and a woman who allowed her entire family to move in with her after getting a windfall—including a daughter who divorced her husband just to come home to her wealthy mom. One investment banker says he knows a man so wary of banks he's stashed $125,000 in cash in cardboard boxes around his house.

“Some people just lack knowledge, and others have dreams that have not been fulfilled,” Robertson says. “Some are too weak to say no, and they really have a problem when everybody comes around. The fact is, it takes a lot of effort to manage money, and some people spend it just to get rid of it. Some become hermits and some become paranoid. What I’ve learned from watching all this is how important it is to not let money control you. Put it in perspective and learn patience.”

That's a view from an outsider. But there are plenty of Houstonians around who have their own insights about windfalls. One with a long-term perspective on windfall psychology also happens to be the only Houston newspaper reporter who ever struck it rich while covering his beat. As a young man without a college education, Jim Bishop joined The Houston Post in 1963 as a copy messenger. By 1966, he’d talked his way onto the staff as a police reporter, and management there had him pegged for bigger things.

But Bishop's break, if it can be called that, came in a way they hadn't planned. It occurred Oct. 19, 1971, when he raced to the southeast side of town to cover a railcar explosion. He arrived just in time for the second blast; it left him hospitalized with second and third-degree bums all over his back. More than 50 people, including Bishop, sued the railroad. He returned to work at The Post and began plotting a new course for his future. By the time his $100,000 settlement was wrapped up in October of 1974, he had already relocated his wife and two children to tiny Montrose, Colo., on the western slope of the Rockies, ready to retire on an amount that in those days seemed inexhaustible.

“That money was my ticket to become a mountain man,” recalls Bishop, today the managing editor of The Victoria (Texas) Advocate. With a laugh, he compares himself to Jed Clampett and the Beverly Hillbillies. “I felt I could do whatever I wanted.”

His mood started to shift as soon as the check changed hands in the lawyer's office in downtown Houston. The $100,000 had already shrunk to $55,000 after legal fees and hospital bills, but it still looked plenty big. By the time Bishop hit the elevator, he was convinced everyone around him was just waiting to take some more. On the plane ride back to Colorado, he repeatedly opened the envelope to make sure the check was still there.

He recalls, “There was a paranoia that was almost consuming until I got it home and in the bank.”

A few months later, he stopped by the local Oldsmobile dealership, where he picked out a new set of wheels and felt the thrill of saying, “I’ll just write you a check.” Instead of finding a financial planner for investment advice, he contacted a realtor and quickly became the owner of a small clothing boutique—and a mortgage, less $10,000 down on the note. Naturally, he decided to change the look of the place and spent another $10,000 on inventory.

Still feeling on top of the world, he exercised a philanthropical urge. He helped a struggling saloon singer keep his mobile home by loaning him $1,000: “It felt good to drive to the bank and just hand him the money. Here I was, 30 years old and acting like a brainless teenager. I actually thought he was going to pay me back.”

Meanwhile the locals were just waiting to pounce. The big spender from the city watched in horror while the hometown department store signed exclusivity agreements with some of the boutique's suppliers. Retail competition was stiff, too. Business dropped, and 18 months after collecting his $100,000 windfall, Bishop relished one ironic accomplishment: “We didn't have to declare bankruptcy. But we were broke.”

In the years since, Bishop has been divorced and remarried. He’s knocked around at several newspaper jobs and worked in corporate public relations in Houston. Briefly, he even drove a delivery truck to make ends meet. Many a time he’s wondered what might have happened had that windfall not sent him spinning down the path toward excess—what might have happened if he'd just been a little more patient with good fortune.

“I’m happy now,” he says. “But I learned that greed is a stronger part of human nature than sex or anything else. That’s what runs the world, and I’m still bitter. When you have a little money, some want to get it and the others are jealous. I’m not nearly as nice a guy as I was before I got my windfall. I went through it thinking I was a smart human being. It taught me how little I really knew.”

Bishop's windfall was small change compared to the payoff last year for Roger Sims, a 42-year-old Houston CPA. Court sanctions prohibit him from disclosing the final amount of a settlement that followed a jury's verdict Nov. 22, 1989, awarding him $31 million as compensation for being wrongfully terminated from a job with Kaneb Services, Inc., now of Dallas. To derail an appeal, both sides agreed on a lower figure to close the case. Even after legal fees and expenses, he says, the payout has enabled him to completely restructure his life. But it hasn’t come without costs.

“I got physically ill,” says Sims of the day he accompanied his attorney, Julius Glickman, to the bank to oversee the transfer of funds. “I couldn’t talk. I got nauseous. My voice was cracking and I started to cry. I couldn’t think straight. It was more money than I ever expected to have in my life.”

That payment also followed five years of turmoil and struggle for Sims, who had risen at Kaneb to become its youngest vice president. As the executive in charge of corporate taxes, Sims faced a moral dilemma in 1985 when presented with a tax return containing questionable deductions—like use of the corporate jet for a trip to the Cotton Bowl. He refused to sign the return and was fired. Later, after speaking out against Kaneb management at a stockholders' meeting, the company filed criminal charges, alleging Sims had tampered with computer records.

His lawsuit plowed fresh ground on certain aspects of wrongful termination law, and the $31 million verdict—including $19 million in punitive damages—ranked as one of the largest in the country that year, prompting some experts to call it “outrageous.”

Sims could have settled the case for $1 million prior to trial, but declined because he wanted to be vindicated; he wanted to prove he was right and Kaneb was wrong. The trial and verdict satisfied that wish. And the subsequent settlement to prevent an appeal has him set for life—and probably a little beyond, if that’s possible.

“I’ve had it long enough now to be able to handle it,” says Sims. “Being a CPA is a definite plus compared to what happens with a lot of people I read about.”

Sims had worked to build a little accounting practice in Alief, but his five-year battle with Kaneb was costly. His second marriage crumbled as soon as he traded the corporate job worth about $100,000 per year for the struggle of a new practice that did not reach the $50,000 mark until 1988. He rang up $70,000 worth of legal expenses, plus another $12,000 for the criminal case. Living on credit cards and borrowed money, he added another $25,000 to the tab he had to liquidate with his windfall. He’d also had to send his daughters to live with their mother in Colorado.

Immediately he paid his debts and then simply gave away to his partners his stock in a company that provides doctors for emergency rooms. Sims has also set up an investment company called The Resolve Group. He's put some of his money in short-term liquid funds and a smattering of rental properties, and has exercised a passion for music by becoming the manager of a local rock group called Zen Archer. He bought a Mercedes—paying with a check—and still makes mortgage payments on his $150,000 home. And he’s back in court on what appears to be another precedent-setting case.

“Kids are kids and ex-wives are ex-wives,” he says with a grin. His child-support payments have grown from $900 to $1,500 without a hitch. But his second wife, from whom he was divorced in 1987, filed a lawsuit seeking her share of his Kaneb settlement as community property. Houston divorce heavyweight Earle Lilly, who is representing Sims in the suit, has offered him some advice.

“Earle predicted I’d have a lot of people asking for money,” says Sims. “He told me to either say. ‘No,’ or just give it to them. ‘Don’t loan it,’ he said, ‘or it will cost you friends.’ He was right.”

Despite an elaborate system for dodging solicitors and “old pals,” Sims has been subjected to a steady parade of panhandlers. Some former business associates wanted $15,000—just to live on. One man called to congratulate Sims on his victory and begged him to do his tax work. Flattered, Sims invited him over, only to hear a request for a $25,000 investment in a company to import wooden cars. Others called to say they, too, had filed wrongful termination suits; the common question was, “Would you help?” He offered moral support. Meanwhile, brokers and insurance salesmen “came in droves.”

Though Sims rejected the pests, he nevertheless found a humanitarian role for his good fortune: He read about someone in the newspaper being evicted and made back payments for that person. He won't discuss any other acts of generosity because boasting, he says, would cheapen their value. But he does smile warmly when explaining one advantage of his windfall: “I’m sick of people taking advantage of me. So it makes me feel good when I can help people who really need it with some Good Samaritan type deeds.”

After one year as a millionaire, Sims says, “I’ve learned there are a lot of people

looking for the easy way out. It’s reaffirmed my faith in friends. I really appreciate those who accept me as Roger Sims and not just someone they can use. And I have more respect for people who work.”

Dewayne Morrison is no accountant. But he too is wiser about windfalls, having won the richest prize in bass-fishing history--$500,000 for a 10.526-pound large-mouth hooked during last year’s Big Sam Big Bass Super Derby. The 34-year-old Deer Park air-conditioning repairman was orphaned as a youth, passed from relative to relative and ended up in high school in Pearland. Despite the cultural gap separating him from Sims, Morrison has learned some similar things about the people in his life since hitting the jackpot.

“The parasites and hustlers started calling,” he says. “I just told them the money had been invested and hung up.”

Actually, he's still waiting to get most of it. Only the first check, for $200,000, cleared the bank. Of that, just $50,000 belonged to him. He gave the rest to three acquaintances who had helped him raise the $400 entry fee—25 percent apiece, as agreed before the contest. Morrison learned too late that fishing-contest protocol would have the backers collecting only half the prize, and even then not until all the money had been paid.

“I paid them anyway,” he says. “When I took the $50,000 check to one of them, I asked for another $65 in expenses I hadn't figured on. They got mad and slammed the door in my face.”

Another neighbor who had once been his friend ignored Morrison until news leaked out about the missing $300,000. Says Morrison, “They came over then and made fun of me. I guess they were just jealous until they learned I didn’t get it all. The way it’s been over $50,000,1 can’t imagine what it would be like if I ever got a million.”

He and his wife have paid off some debts. They exorcised the urge to splurge with a trip to Gallery Furniture, where Jim “Mattress Mac” Mclngvale welcomed them like celebrities. Morrison also gave each of his children a $100 bill to blow. They've stashed enough to pay the tax bill—and to finance a lawsuit against the contest. That action could net the Morrisons more than the contest did, because Morrison has charged that the scandal derailed lucrative opportunities to endorse fishing products in bass magazines. He thinks maybe the past year has prepared him for a larger check if it ever comes.

“At least I’ve had a training course in windfall psychology now. If I had to look back some day and saw I had nothing left, I’d be mad at myself,” he says, noting that memories of his troubled youth have bolstered his conservative outlook. “I’m sensitive about creating shaky ground for my family. I had enough of that when I was a kid.”

Morrison has his dreams. If he ever gets all the prize money, he’d consider moving to a place where he could pursue bass fishing as a professional guide. And he’ll tote along the moral of his windfall: “If you make a deal you stand beside it. Maybe I live in an old-fashioned world where if you do what you’re supposed to do, people will, too. But I feel like I’ve been true to myself and that gives me confidence. And now I know that in bass fishing anyway, I can compete with the best.”

Perhaps the last word should come from a professional investor who also knows the thrill of collecting on a windfall. Allen Baker is an account executive with Dean Witter who plays poker for a hobby. Last year, he won $260,000 in a single exhilarating day in a preliminary at the World Series of Poker in Las Vegas. For someone who can earn $100,000 when the stock market soars, the pot wasn't all that big. But it did help Baker focus on a principle that sooner or later affects everyone, whether they count their windfall in chips or emotional currency.

“The accomplishment I felt was in beating the other players; that's what was in my heart,” he says. “When you win that thing, they give you the money and a gold bracelet. Everybody asked me how it felt to win all that money. Nobody asked me how it felt to beat all those other players.

“All of us are a little insecure, and whenever we win something, we doubt ourselves. We wonder if it was luck or something else,”  he continues, and notes that successful people are the ones who can focus on the chore at hand: “The game now is to make that money grow.”