Creating and having plan for personal finances is essential, no matter how much money you make or what your status is on the totem pole. This goes for celebrities as well, as a poor financial decision can lead to the same challenges as someone with a lesser income. To examine this further, here is a list of some of our favorite celebrities and five takeaways from their financial mess.
Famous social rights activist, singer and performer, Aretha Franklin was a prolific musician. With 73 chart-topping songs, Franklin amassed a large fortune throughout her career.1 Unfortunately, Franklin passed away in 2018.2 And without a will, Franklin’s estate was distributed amongst her children per Michigan law.
When an individual passes without a will, their estate can go through several legal and financial hoops. From a financial standpoint, this process can be expensive, reducing the overall value of an estate. And without specific instructions, 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 and did not want to know how much money he had or was spending, instead choosing to trust his manager. As a result, Joel’s manager spent and invested Joel’s money in multiple ways without approval, which ultimately ended with Joel suing his manager for $90 million.3
Though money can be a stressful topic for many, understanding one’s finances is integral to healthy money management. Compiling a list of expenses and clarifying where your money is allocated is a great first step. And if you’re looking for extra assistance, investment advice or other financial guidance, a trusted financial advisor can help.
Overspending can place some of the most wealthy individuals into financial trouble. Many celebrities are known for overspending, but one of the most notorious in recent history is Nicholas Cage. The well-known American actor 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 aren’t necessarily the problem, it’s how quickly and how often they occur. Maintaining a budget and spending well should be the goal of any individual and is one way to not only accumulate wealth but maintain it as well.
Home buying is a large investment. It’s 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, this exact situation happened to actress Kristen Bell, 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 all know about the success of Facebook over 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
With Timberlake taking a loss on his $35 million investment, this turned out to be a poor investment decision for him.7 As any financial professional will tell you, investing always comes with risks. Instead of investing in one goal, diversification can be used to help offset risk.
Every name on this list 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 specific situations, we can see the importance of an effective financial plan, no matter how much your net worth.
Financial Planning is not a DIY project, just like going to the doctor isn't. Seek out the help of a trusted financial professional to come up with a plan to avoid making any mistakes that put you in one of these situations.