The rich and famous are not immune from making major mistakes with their money. The good news is that because these missteps are often so public, they give us a chance to learn from their costly mistakes. Here are six major money blunders and lessons we can learn:
Lesson #1: Live within your means
Nicholas Cage: Nicholas Cage, one of Hollywood’s highest paid actors, earned $150 million from 1996-2011. He was paid $20 million alone for his role in “National Treasure “and “Gone in 60 Seconds”, but in less than 10 years most of his fortune had vanished due to lavish spending. He also faced legal trouble which further exacerbated his financial problems. His spending was the stuff of legends, 15 residences including two private islands and two European castles, private planes, 50 rare cars, 30 motorcycles, four luxury yachts and a 67 million year old dinosaur skull….the list goes on! The lesson here is, just because you have lots of money doesn’t mean you should spend more than you can afford.
Lesson #2: Pay your Taxes
Willie Nelson: In 1990, the IRS seized Willie Nelson’s assets and properties in six states to help pay the estimated $32 million the country music star owed in back taxes. Even after his assets were seized, his debts still totaled $16.7 million — including $10.2 million in interest and penalties. Even superstars are not immune from paying tax bills, so always make sure to pay your taxes or have your tax preparer file an extension if needed. Doing nothing is not an option.
Lesson #3: Know how your money is invested
Billy Joel: Billy Joel wanted to focus on his music and not on where his money was being invested. This mistake cost him a pretty penny. Billy sued his former financial manager, Frank Weber, for $90 million, for fraud and breach of financial duty. Frank allegedly took $10 million of Billy’s money and invested it in ways that would benefit his own companies, earning Frank $20 million in commissions. It was also alleged that the shady manager double billed, cheated the singer out of various fees and mortgaged his copyrights for $15 million without his approval. On top of that, the manager created financial statements that reported false information regarding Billy’s true finances. Unfortunately, the piano man’s experience teaches us an important lesson about staying engaged with our finances.
Lesson #4: Keep your will updated
Heath Ledger: When actor Heath Ledger died unexpectedly at age 28 he had an outdated will that was not reflective of his relationship with actress Michelle Williams and their 2 year old daughter. Heath’s will, which was written three years before his death, left all of his assets to his parents and sister. The lesson learned here is that when situations in your life change, so should your documents.
Lesson #5: Be careful with risky investments
Odell Beckham Jr.: Odell Beckham Jr. signed with the Los Angeles Rams on November 12, 2021. At that time, the wide receiver opted to take his entire NFL salary in Bitcoin. Bitcoin was hitting all-time highs, breaking currency records and worth approximately $64,000 per coin. While it appeared to be a great decision at the time, Bitcoin’s most recent dip in the market shattered the price of the coin. The cryptocurrency is now worth nearly half of the aforementioned price, hovering at $35,000. It was recently reported that Odell’s salary is now worth only $413,000 as opposed to the $750,000, excluding taxes. Once taxes are factored in (he will be taxed on the full $750,000 at a 50.3% rate for Federal and CA state income tax), he takes home $35,000, which equates to just one Bitcoin. Since there is no guarantee if Bitcoin will continue to fall or reach the same heights as prior, it is uncertain if he will benefit in the long run. Such a volatile investment could be dangerous, especially if he was relying on his salary to afford his lifestyle!
Lesson #6: Protect your assets when entering into marriage
Paul McCartney: When Paul McCartney married Heather Mills in 2002 there was no prenuptial agreement, and his net worth was estimated at a whopping $800 million. All you need is love right? The marriage only lasted 4 years, but it cost the Beatle $50 million dollars and an ugly court battle. Luckily, McCartney could afford to take the hit, but his experience teaches us an important lesson. A prenuptial or postnuptial agreement is not romantic, and no one walks down the aisle thinking it will ever end badly, but protecting yourself and your assets can save you lots of agony and time in the event of a divorce.
So, let’s always be careful before taking financial advice from celebrities. In the meantime, we’re grateful for the lessons they can teach us of what not to do.