Celebrities Make Money Mistakes Too
It is imperative that you create a plan for your personal finances. While you may think that budgets are only for paycheck-to-paycheck people, it really doesn’t matter how much money you make. No amount of money can protect you from bad financial decisions. This goes for celebrities as well, as a poor financial decision can lead to the exact same challenges as someone with a lesser income. To further examine, here is a list of some of our favorite celebrities and five takeaways from their financial snafus.
Famous social rights activist, singer and performer, Aretha Franklin was a prolific musician. With 73 chart-topping songs, the “Queen of Soul” amassed a large fortune throughout her career.1 Sadly, Franklin passed away in 2018 at the age of 76.2 Because she died without a will, Franklin’s estate was distributed amongst her children per Michigan law.
When an individual passes without a will, their estate can be forced to jump through several legal and financial hoops. From a financial standpoint, this process can be expensive, reducing the overall value of the estate. Additionally, without specific instructions to follow, the family of the deceased could disagree on the dispersal of the estate, resulting in more complications. A will provides clarity and planning for the family and ensures the last wishes of the deceased are respected.
To avoid being perceived as inauthentic, some artists avoid focusing on their money. Famous musician Billy Joel took this approach. He did not want to know how much money he had or how much money he was spending. The “Piano Man” instead chose to put all of his trust into his manager, Frank Weber. As a result, Joel’s manager spent and invested Joel’s money in multiple ways without approval, which ultimately ended with Joel suing Weber for $90 million.3
Though money can be a stressful topic for most people, understanding your finances is integral to healthy money management. Compiling a list of expenses and clarifying where your money is allocated is a great first step. It may feel overwhelming if you’ve not done it before, but it is worth the agita. If you find you need extra assistance, investment advice or other financial guidance, a trusted financial advisor can usually help.
Overspending is never good and can place even the most wealthy individuals into financial trouble. Many celebrities are known for their reckless overspending, but one of the most notorious in recent history is Nicholas Cage. Stories of the National Treasure actor’s spending are legendary. He spent $150 million of his accumulated wealth on a variety of purchases - from multiple castles in Europe to collector cars and a pet octopus.4
Cage’s purchases weren’t necessarily the problem, it’s how quickly and how often they occurred. Maintaining a budget and spending carefully should be the goal of any individual and is one way to not only accumulate wealth but successfully maintain it as well.
Home buying is a large investment for anyone. It can be both stressful and exciting, even more so depending on the price of the home. Unfortunately, many individuals fall into financial troubles, and their home is forced into foreclosure. Sadly, actress Kristen Bell had to let it go, when her $3.1 million home went into foreclosure.5
Bell was luckily able to recuperate her losses. Though for many, a foreclosure has drastic consequences, from credit damage to possible bankruptcy.
We are all aware of the wild success of Facebook, especially when you compare it to its predecessor, Myspace. But did you know that Justin Timberlake was involved in the purchase of Myspace with hopes to reestablish the social media platform?6 He may have brought sexy back, but he failed to do the same with Myspace.
With Timberlake taking a loss on his $35 million investment, this turned out to be a very poor investment decision for him.7 As any financial professional will tell you, investing always comes with risks. A great way to help offset risk is to diversify your investments. Talk with your trusted financial professional to find out if you’re appropriately diversified.
Every person on the list above has accumulated a large sum of wealth. Despite that, these celebrities can experience the same financial troubles as anyone else - although sometimes on a grander scale. Examining these specific situations, we can see the importance of a budget and staying on top of your finances, no matter how much your net worth.