Why the Rich Go Broke

George Foreman — bald, smiling and gigantic — is propped atop a stool in Gleason’s Gym, the venerable boxing haunt in Brooklyn, watching a videotape of his heavyweight championship bout in 1994 with Michael Moorer. Foreman once devastated opponents with brutal, staccato punches short on artistry and long on force. He disposed of formidable pile drivers like Joe Frazier, traded blows with dangerous magicians like Muhammad Ali, and dropped the undefeated 26-year-old Moorer in the 10th round with a right to the jaw

Foreman became the oldest heavyweight champion in history. Foreman confides in an interview that something else actually drove him back into boxing in the late 1980’s, and it had nothing to do with proving the meaninglessness of an AARP card. Having blown about $5 million, made mostly, he says, during his salad days as a young champion, he desperately needed the money he could earn by fighting again. A former street thug from Houston, accustomed to dispassionately cutting down the most ferocious of men, Mr. Foreman was on the verge of bankruptcy in the 1980’s — and it terrified him.

Even so, the trajectory of Mr. Foreman’s finances once had him headed into a gilded pantheon of big buckaroos who have squandered often-unimaginable sums of money, come perilously close to personal bankruptcy or completely lost their shirts. The ranks of well-heeled debtors include Thomas Jefferson, Buffalo Bill Cody, Mark Twain, Ulysses S. Grant, Debbie Reynolds, Michael Jackson, Dorothy Hamill, Robert Maxwell, Mike Tyson, Jack Abramoff and a long and pitiful cast of lottery winners.

Why can’t the wealthy restrain themselves from spending more than they have? Why do rich people, those who would seem to have all the financial padding one needs, wind up deeply in debt? Even worse, why do some of them end up broke?

Foreman, street-smart and now mindful of his wallet, has his own perceptive answers to those questions. For the man who came back from the brink, it’s all a matter of discipline and proper boundaries.

“A lot of people just don’t grow up,” he says. “I mean, 65-year-old men. They just don’t grow up. They don’t understand that money does not grow on a tree and that you’ve got to respect every dollar. Like Rip Van Winkle — the guy who slept — they party, party, party, then they wake up. ‘Oh my God!’ And they do something desperate trying to recapture what they had. And it doesn’t work like that. You must stay awake.”

http://www.nytimes.com/2006/09/17/business/yourmoney/17broke.html?ex=1158638400&en=8516b0a91ec7d0da&ei=5087%0A