Learning money lessons from celebrities
It is quite common for people to look at celebrities with a tinge of envy – thinking how it would be so relaxing to never have to worry about money, earning millions of dollars year after year. Sure, the income that celebrities earn is far more than many people will see in their lifetime but that doesn’t mean they manage their money any better than the next person.
Even the rich and famous are not immune to financial blunders.
The case of MC Hammer is very well-known. He filed for bankruptcy with $13 million in debt after paying monthly wages in the amount of half a million to over 300 people for a term. It is clear that he overplayed his importance as a musician and individual.
What is stranger is that even savvy celebrities can make blunders.
Take Madonna, for example.
Till death do us part…
She has been an international superstar for almost thirty years. She is considered a marketing genius, reinventing herself and setting trends even now at 52. Somehow she missed signing a prenuptial agreement with Guy Ritchie. Her divorce cost her around $75 million. Guess that is not much where she comes from.
Signing a prenup is something many celebrities miss doing and then regret. When Reese Witherspoon and Ryan Phillippe got divorced, they split their incomes, unfortunately for Reese, who was making ten times more than him at the time. Sandra Bullock was wise not to make this mistake. She doesn’t owe her unfaithful ex a dime. And still, prenups are often avoided. This document somehow feels emotionally wrong. It feels like the very act of signing a prenuptial agreement can doom the marriage. Bottom line? If you want to be on the safe side, the prenup is your only option.
Enjoy your vices, but in moderation
Gambling, as with all vices, should be enjoyed in moderation. Being desperate to win can only result in a loss. A gargantuan one, in Michael Jordan’s case. He lost a reported $57,000 while gambling. He also lost over a million dollars in a single golf game, mistakenly believing his amazing basketball skills would translate to the golf course.
Death and taxes
A common blunder is forgetting to update your will. RIP Heath Ledger. In his will, signed in 2003, he left everything to his family. His daughter was born in 2005, but he did not update it. Now his $20 million fortune is the subject of dispute.
Nothing is for sure in this world but death and taxes.
Many celebrities can vouch for the latter.
Among them are Nicholas Cage, Pamela Anderson, Khloe Kardashian, Darryl Strawberry, and Wesley Snipes. Nicholas Cage’s earnest appearance is actually quite deceiving. He concealed upwards of three million dollars via Saturn Productions, his film company, in personal expenses. He should have hired an accountant, whose services are not only useful but also tax deductible. Poor Khloe Kardashian seems to owe $18,490 in back taxes. She had an accountant and actually did pay her taxes through him, but he “forgot” to present the respective documents to the tax officials.
Some people are just not to be trusted. Celebs like Leonardo DiCaprio, Cameron Diaz, and Matt Damon can testify to this. Their “financial manager” Dana Giacchetto stole around $10 million from them. Do not hire an accountant just because you heard he or she was good.
Spend less than you earn
Finally, live within your means. Do not spend more than you earn because you might – God forbid – find yourself in Ed McMahon’s situation. He owes $664,000 in mortgage payments and got foreclosed on. Actor Stephen Baldwin and musician Tom Petty share this problem. Both have filed for bankruptcy at one point in time.
Whether you make millions or thousands, spending less money than you earn is a cure for many financial problems that people encounter.
Melissa Dean writes for Credit Cards Canada, a blog offering an unbiased perspective on credit cards in Canada.
Yes, we should all learn to spend less that we earn. This is something that I had to learn the hard way.
Most celebrities do not have money because of their financial skills, so it is an additional challenge for them to manage that money when they do start earning it in abundance.