Celebrity Money Meltdowns

Tough economic times have tested the vast majority of Americans – and that includes celebrities.  Lately there have been several high profile individuals from the worlds of sports, entertainment, and the arts who have seen their financial woes hit the front pages. A money meltdown is right up there with death and divorce as one of life’s most stressful experiences. So let me say straight up that my intent in highlighting these experiences is not to poke fun or make light of their situations.  Rather it is to help others by highlighting common financial pitfall that all of us (myself included) can learn from.

  • NBA Star Antoine Walker – Broke & In Big Trouble: During a successful career spanning 12 years, Antoine earned over $110 million. Now it’s gone. At age 33, Antoine has creditors chasing after him and is facing felony check fraud charges.  Much has been made of his bling (the cars, watches, entourage).  However, he was also by many accounts extremely generous with friends, family and those in need.  Antoine’s problem was that he spent as if his peak earnings years would repeat every year. He’s not alone. Many people with variable incomes (commission-based sales people, entrepreneurs, etc.) fall into this trap. What we all can learn is if you have a volatile income stream, you should spend based on your average, or even trough, earnings to avoid a cash crunch when leaner times appear.
  • Bestselling Mystery Novelist Patricia Cornwell – Looking for $40 Million: This prolific, smart, and highly popular writer has suffered losses estimated in the range of $40 million.  She’s suing the money management firm that handled her money, arguing they didn’t heed her instructions to “invest conservatively” and even cut checks for gifts given to people she didn’t know. Patricia’s problem was that she handed over complete control of her finances to her advisors.  As it frequently takes single-minded devotion to one’s craft to excel, the need for some delegation is understandable.  What we all can learn is when it comes to your money, your motto (to quote President Regan) should be “Trust, but verify.”  Remember, no one will ever care about your money as much as you do. So you must stay involved, even if you have an advisor
  • Uber-talented photographer Annie Leibovitz – Fighting to Keep Her Home: This American icon has taken some of the most famous photos… ever.  From John Lennon & Yoko Ono (hours before he was shot) to a very pregnant (and very bare) Demi Moore, that was Annie’s work.  In the go-go years Annie’s day rate was rumored to be $250,000. Today she is $24 million in debt and is a single mom of three young children fighting to keep her home. Annie’s problem was spending liberally and borrowing aggressively against the equity in her home to make up the difference. When the credit markets seized up, she found herself in a cash flow crunch, and resorted to putting up her homes and copyrights to her lifetime work up as collateral for a loan.  Now, that collateral may be called in. What we all can learn is that debt really is a four-letter word.  Borrow at your own risk and understand that there will be consequences if you can’t pay it back.
  • Famed actor Nicholas Cage – Owes Over $6 Million in Back Taxes: This super talented actor owes the IRS.  Big time.  Uncle Sam wants over $6 million in back taxes from Nicholas Cage. The vast majority stems from the $12 million-ish in income he earned in 2007 that apparently he did not pay taxes on.  Nicholas’s problem is that he appears to be cash strapped when it comes to paying those takes. What we all can learn is that if you are self-employed, as so many more of us are these days, it’s vital to set aside money for taxes at the time you earn that income.

6 Replies to “Celebrity Money Meltdowns”

  1. great post! i think people have a tendency to just roll their eyes when they see that someone rich and famous has gone broke. but as you outlined clearly, they are making the same mistakes that everyone makes with their money. these celebrities just do it on a much larger scale!

    1. Thanks Susanne – Think you are spot on. It’s so easy to think “well, if I just had more money everything would be great.” But what I’ve noticed is that without a solid knowledge of the basics of personal finance, more money so often just leads to… the same problems on a bigger scale! One book I love that really hammers this home is Stop Acting Rich, by the author of The Millionaire Next Door.

  2. Some people live within their means, and some do not, and while it’s easier to live within your means if you have more money, often the sheer size of the paycheck isn’t what makes the difference. All these stories are good examples of that!

    1. So true – if you are not making a living wage, are unfairly underpaid, or are un- or underemployed… making ends meet is a daily struggle. Full stop. That said, during my 15 years working in the financial services industry I was absolutely stunned by the number of people I met who were making six or SEVEN digit incomes and still living paycheck-to-paycheck as a result of prioritizing joy today over pleasure tomorrow. While nothing is ever certain, one thing is clear… if you spend more than you earn you will end up in the red. And that is a very painful place to be. My hope with this post is to show how widespread this problem is.
      And speaking of problems, dear readers, if you have not read this piece by Laura Vanderkam, give your brain a gift that will keep on giving and take a few minutes to read…
      . Hands down, this was the best Op-Ed I read in 2009 on the subject of women’s economic empowerment.

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