For Those About to ProposeST
mod (Andy) note: "Blast from the past - Best of Eddie" - This one is originally from January 2011. If there's an old post from Eddie you'd like to see up again shoot me a message.
With Valentine's Day two short weeks away, some of your girlfriends are no doubt ratcheting up the pressure on you to pop the question on the most romantic day of the year. Maybe you already live together. Maybe you've been going out for a few years. Maybe you met her in a Chelsea dive bar on Tuesday. It's no matter. They all want the same thing.
Allow me to introduce Charles Brandes. Sure, he's a big shot today pulling in an estimated $16 million a month, but he wasn't always. He was once just a young monkey like all of you. And therein lies his cautionary tale. For it was at that point in his career that he met Linda King Formo, a single mother earning $6 an hour as a librarian.
Brandes started his own firm in 1974 and was content to grow his AUM over the subsequent decade. He met Formo in 1983 and, after a three-year courtship, they were married in 1986. Even though he wasn't a BSD yet (he made about $180,000 in 1986), he obviously went into the marriage with some reservations, evidenced by the pre-nuptial agreement he presented to her which she refused to sign.
Let me say that again for the cheap seats, because it's important that you get it. He presented her with a pre-nuptial agreement and she refused to sign it. She allegedly told him at some point before the wedding that, "I will have no claim or interest in your business", but she denies ever saying it and it's impossible to prove and not legally binding anyway.
Fast forward 18 years to 2004. The marriage is over, and they're in divorce court. Charles is now a very big deal, and the lifestyle he has lavished on Linda could be described as over the top by any sane measure. By California statutes, he can only be forced to pay her $36,400 per month in spousal support but, either out of genuine concern for his soon-to-be ex-wife or his desire to head her off at the legal entanglement pass, Charles gives her a home in Rancho Santa Fe, a beach house in Del Mar, a Central Park penthouse and two other Manhattan condos, and two condos in Salt Lake City. To alleviate any liquidity concerns she might have, he throws in $18.7 million in cash.
It's not enough.
The interest alone on the money he gave her generates $155,000 a month. He throws another $350,000 a month into the pot, bringing her monthly income to a staggering $500,000. But she's just scraping by, and has now set her sights on the $140 million he has in various S-Corporations. The reason she can't make ends meet?
- $30,000 a month at the casinos
- $340,000 Mercedes Maybach
- Upkeep on her various mansions
- The 210 pairs of shoes in her closet
- Half a million a month doesn't go as far as it used to, yo
Just so you don't think she's not deserving, she'll tell you she was instrumental in his success. How? She convinced him to dress better, get a nose job, and she busted his balls to work harder 'cause mama needs new shoes.
Guys, I hope you see where I'm going with this. You might be worthless today, but chances are you won't always be. You pay for car insurance, health insurance, life insurance (if you don't, you should). Why would you leave such an obvious financial vulnerability unprotected?
The best advice I can give is don't get married. Ever. There's just no percentage in it for a young guy with significant earning potential. Especially if there's a major income disparity between you and your significant other (hedge fund manager vs. $6 an hour librarian).
But I've been married three times myself. Just so I don't sound like a hypocrite, if you must get married - by all means protect yourself. A pre-nup doesn't mean you love little Susie Rottencrotch any less. And she won't hesitate to sign it, if her intentions are pure. If she does hesitate, that should tell you something.
Have a great weekend, guys, and don't fall into the Valentine's Day trap.