What Happend to Ed McMahon?

Ever wonder what happened to Ed McMahon? You know the one who was Johnny Carson’s side kick, Or the one who promised to visit you with a million dollar check. You know “You may have already won.”

Well Look at this headline:

Ed McMahon’s home in danger of foreclosure

By CHRISTY LEMIRE

LOS ANGELES (AP) – For years, Ed McMahon promised wealth, comfort and happiness as a pitchman for the American Family Publishers’ sweepstakes. Now, he could use some of that cash himself.

Ed McMahon in forclosureSo what happened? Like I tell me students all the time: You have to know how to read the numbers. Ed McMahon could not read the numbers.

Read the article and you will see that he had a 4.8 Million Dollar Mortgage. 4.8 Million dollars? How can that happen from this man? Did he not make enough to put down a larger down payment? Clearly he did not know or understand the situation. He took out the 4.8 Million loan and took out a $300,000 home equity line of credit. This was after he received a $7.2 Million Dollar settlement for problems related to mold.

My favorite quote from the whole article is this

Bragman said there was “a certain irony” in the fact that McMahon has always tried to connect with average Americans, and now he’s experiencing some of their same problems.

Well it is true and it is sad. So many people, including me, put too much emphasis on your home growing in value. It is OK to roll all your debt into your home because it is always going to go up right? Well not always.

It may make sense to invest in a piece of property for capital gains in a long term investment. Or in other words if you want to buy a house to get more money out of it is to do it in the long term. Too many people see this and take money out almost yearly. And for what? To make more investments, to increase their financial portfolio? Or is it to buy a new flat screen TV. It is to put in a pool to increase the “value” of the house. But if you are taking out a loan for this it really is not increasing the value is it. It is counter productive. The value may go up, but your equity. You used it up with the loan.

So this gets back to financial education. When you don’t understand completely how things work you get taken advantage of. We are in America having problems with house lending. Ed McMahon proves that it is happening to everyone. Everyone is in jeopardy. But, are the banks in jeopardy. No they are still making money. They still have properties to foreclose on. They will get paid in the end. They may not get as much as they hoped, but they will still get paid.