Your Favorite Celebrity Earns Millions, But They Make Money Mistakes Too. 5 Takeaways From Their Financial Snafus
About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual Fiduciary Financial Planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
Creating a plan for personal finances is essential, no matter how much money you make. This goes for celebrities as well. 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 snafus.
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 Because she didn't have a Will, Frankin’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 help guide you on Estate Planning, we have created This Checklist. It covers key considerations regarding the most common Estate Planning documents, such as a Will.
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 Planner can help. If you've never worked with a Financial Planner and you're unsure where to start, read my blog post, 6 Questions You Should Be Asking When Hiring a New Financial Planner. This blog post discusses the value of a Financial Planner and provides helpful tips so you know who and what to avoid.
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 accumulate wealth and maintain it as well. If you're having trouble keeping spending under control and planning for your goals, read my blog post, 8 Ways Highly Successful People Set And Achieve Goals.
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. Bell was luckily able to recuperate her losses. Though for many, a foreclosure has drastic consequences, from credit damage to possible bankruptcy. Read my blog post, 4 Common Mistakes Made by First Time Homebuyers, to make sure you don't make the same mistake.
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. Making financial decisions is stressful. Read my blog post, 5 Techniques to Overcome Financial Stress, to help with the anxiety you face when making financial decisions.
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. If you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
If you're looking for guidance on your investments, you'll want to read this month's Newsletter. In my April Newsletter, I discuss Gamestop, market speculation, long-term investment returns, and 9 investing mistakes you should avoid.
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