If you were rich, would you know how to handle all your money? Would you know how to save it, spend it wisely, and make it grow? That’s a difficult to question to answer if you’ve never been “deep in the green.” Celebrities who have not been born into their fortune often find it difficult to deal with the excessive amounts of money. Many of them make mistakes that cannot be taken back and so they end up going bankrupt because they do not know how to handle their cash.
Since these celebrities never knew was it was like to have so much money, they go on ridiculous spending sprees. The money slowly drains from their accounts and they get into situations that end up having a negative effect on their accounts. It is hard to resist luxury items like the newest technology, a shiny new sports car, or massive mansions so lots of their cash is spent on these items and they usually get the cream of the crop because they can. However, what they don’t realize is that things such as homes or cars need upkeep and monthly payments that are out of their budget range.
This does not happen to everyone who falls into riches, which is why this list of celebrity money mistakes has been compiled to give everyone a general list of guidelines they can follow. Whatever decisions you make, whatever chances you decide to take, just make sure you don’t commit any of the most common money mistakes many celebrities have made.
10. Excessive Spending
When you have too much money, you may not be as worried about how to make money as much as how to spend it. Spending excessively and buying everything you want may be good for a while, but if you keep this up, it won’t be good for you or your wallet.
Many celebrities are prone to excessive spending. Among the most famous are model Naomi Campbell, who spent three days celebrating her 36th birthday at the Burj al Arab in Dubai to the tune of $2.1 million, and actor George Clooney, who spent a small fortune to wine and dine girlfriend Sara Larson at the Hugh Hefner Sky Villa at the Playboy Tower in Las Vegas’ Palms Casino Resort.
9. Listening to Bad Financial Advice
You may not be able to handle your money on your own and it may require the services of a good financial adviser. However, not all financial advisers out there are honest, responsible, or even legitimate. In the case of many celebrities, the people they trusted to give them financial advice ended up stealing from them or messing up their finances.
Two celebrities who received bad financial advice are actor Burt Reynolds, who lost a lot of money trying to run a chain of restaurants called PoFolks, and Debbie Reynolds, who tried to run a hotel and casino in Las Vegas that suffered from a not so good location.
8. Excessive Lending Money to Family and Friends
Victory has many fathers. What does that teach us? Rich people will suddenly have so many friends and family. People you barely know will suddenly come knocking on your door, calling you for money. Beware of the old saying: “What’s money between friends?” You might think you are lending these people money, but for them it’s a gift that doesn’t have to be repaid.
So who are some of the celebrities who learned this lesson the hard way? Well there’s TV actor Willie Aames, as well as heavyweight championship boxer Leon Spinks and actress Natasha Lyonne, they all found out too late that having too many relatives is sometimes a bad thing.
7. Poor Investment Choices
Investing money is always a good thing. This, however, became bad when people can’t always immediately tell a good investment from a bad one. This goes double for celebrities who usually don’t have to worry about where to get the money for the investment, or don’t even bother learning about the finer details of what they are putting their money into.
Among the biggest known celebrity investments gone bad are the failed takeoff of J Hotels by rapper Jay Z, the dive of the equity firm Elevation Partners of U2 frontman Bono, and 1976 Gold medalist Dorothy Hamill’s venture to run “Ice Capades,” which ultimately thawed.
6. Living Beyond Their Means
You should not spend more than you earn. Sadly, many celebrities do not seem to be familiar with this piece of common sense and spend lavishly until they have no more money left. It’s nice to splurge and reward yourself every once in a while, but remember that while your desires may not have a limit, your wallet does.
Who are some of the celebrities who learned this the hard way? Singer Cyndi Lauper lost everything way back in 1981; fortunately, a successful comeback saved her finances. Another singer, Courtney Love, had to live in a rented apartment after blowing her fortune.
5. Impulsive Spending
It’s forgivable if you once bought something you don’t need—even if you do this twice. However, if you choose to do this over and over again, you may really have a problem. This problem may be further magnified if you have a lot of money.
Certainly, several celebrities have been proven to be prone to impulsive spending. Jay Leno, for one, fits the bill. Can he really drive all of those cars in his collection? Other examples include former Philippine first lady Imelda Marcos, who once had over 2,000 shoes in her wardrobe, or Johnny Depp, known for collecting “a lot of stuff”.
4. Buying Luxury Items
The rich and famous are drawn to items that are needlessly, ridiculously expensive. Who needs expensive bottled water from a glacier when you can have a perfectly good bottle of water from a plant? Or a heavily bejeweled smartphone that functions just like a regular smartphone? Well, apparently they do.
Some celebrities who regularly spend money on such luxuries include former Spice Girl Victoria Beckham, who recently spent $35,998 on a Stuart Hughes 24-carat iPhone 5, Actor Daniel Radcliffe, who spent $17,000 on a mattress, and actress Katie Holmes, who spent $6,000 on a Halloween costume for her fashionista daughter Suri.
3. Tax Evasion
Even the rich and famous have to pay their taxes or else the government will go after them. Sure, celebrities might be able to get away with it for a while, but remember that the IRS will always be counting, watching and waiting for the perfect moment at which to strike.
One of the biggest and most recent cases of celebrity tax evasion involved lifestyle icon Martha Stewart, who was forced to pay the $220,000 she owed to the government before being jailed for another offense. Other celebrities who have had tax troubles include Brat Pack member Sammy Davis Jr., actor Wesley Snipes, and singer Willie Nelson.
2. Not Managing One’s Own Money
If you have a ton of money it might be good to manage your own finances. Unfortunately, many celebrities do not have the time to do so and often hire others to do this for them. In many cases, they hire the wrong people who end up either mismanaging money or defrauding or stealing from them.
1. Not Saving Money
Most of us have been taught from childhood that a penny saved is a penny earned. We don’t know if the rich people and those who always see a steady inflow of cash are taught the same thing. What we do know is that what happens to us if we don’t save money is likely to happen to these celebrities if they don’t save.
So who are some celebrities who have gone bankrupt?
Pamela Anderson is said to owe $1.1 million in back taxes and has put up her house for sale. Way back in 1978, Larry King had to file for bankruptcy after he was accused of stealing money from a business partner. Actress Lena Heady once said she only had $5 left in the bank after divorce and custody proceedings.
However, this does not mean that they won’t make money again in the future. After all, bankruptcy is often a temporary thing, especially when it comes to the well-known and well-connected.
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