If you became very wealthy how would you treat your money? Would you plan for it, save it, invest it, spend it or give some of it away? So many people are obsessed with celebrity. In traffic, at the newsstands, you see glossy magazines that describe the lifestyles of the rich and famous. Behind that veil, are ordinary people that make mistakes just like everyone else, however their mistakes can appear to be more pronounced as a result of their celebrity. Time and time again we read of celebrities who have made and lost huge fortunes. Many make mistakes that cannot be easily reversed and end up bankrupt. Here are some important celebrity money lessons for us all.
Celebrities are under enormous pressure to keep up appearances and live above their means. They often live a lifestyle that displays conspicuous consumption rather than any sustainable financial security and spending can get out of control. But spending excessively over a period of time without corresponding inflows can have dire consequences. It may be hard to resist luxury items such as expensive jewelry, expensive cars and homes.
Celebrity is almost synonymous with luxury; there is a lifestyle that is associated with visual success, and not financial stability. Building wealth is not about how much you make but how much you can keep.
Poor investment choices
It is always recommended to seek professional advice, as advisors tend to have a plethora of information with which to make informed decisions. However, not all financial advisors are honest or appreciate the fiduciary duty that comes with money management. Many celebrities delegate total responsibility to “advisors” who may end up either mismanaging their money, defrauding them or making some poor investment choices with their money.
Many celebrities do not bother themselves with the finer details of the hows and whys of investing and sometimes find themselves invested in extremely high-risk investments only when all the money is already gone. If you pay little attention to your investments and do not understand what you are getting into, you become very vulnerable. Even though you might not have the time, expertise or inclination to manage your own finances, you ought to have a basic understanding of what you are investing in and the implications, both positive and negative, of doing so.
Not paying taxes
Tax laws can be confusing and are constantly revised and updated Whether you are the ordinary worker or a super star, tax obligations cannot be ignored or they will come back to haunt you. Many celebrities have inadvertently fallen foul of the tax laws as they have not kept abreast of this important aspect of their financial lives. Remember that you are obliged to pay tax and if you fail to do so, the law will eventually catch up with you.
Not having a prenuptial agreement
Sadly the pressures of celebrity in the full glare of the media and the public, can put tremendous strain on relationships. Where you bring substantial assets to a partnership, particularly where this might be a second or third marriage, it is worth considering a pre-nup to protect assets before getting married. A prenuptial agreement may not be romantic, and it does not necessarily come from a pessimistic outlook; it can save a couple from the long drawn out agony in the event of a divorce.
Not reviewing an estate plan
An estate plan should be updated to address any major life event such as the birth of a child or grandchild, a marriage, or a divorce. If one fails to do this, beneficiaries that you had planned to bequeath assets to might end up being completely left out of a will or trust.
Not having adequate insurance in place
A serious illness or disability can obliterate ones finances especially where a career in sports or the entertainment industry comes to an end. Celebrities often face financial challenges due to income fluctuations as their earnings are seldom steady or guaranteed. People tend to overlook the financial implications of a serious illness and even more people ignore the need for insurance until a major mishap or setback occurs; it is only then that the impact of inadequate insurance coverage or emergency savings is glaring. No matter how meticulous you are with your finances, failure to purchase adequate insurance can impair your financial future and put you in a desperate situation in an instant.
You may not be a celebrity but there are countless lessons to learn from their lifestyle. Plan for what could be an uncertain future by diversifying earning streams, investing and protecting the large sums of money earned today for tomorrow. Do not be complacent. Protect your future to avoid the road from riches to rags.
Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.