Are celebrities and athletes more financially irresponsible than the rest of us? How is it that some of the wealthiest among us end up broke? Today we are going to peek behind the curtain (or take a look under the red carpet) to see how millions of dollars (and in some cases hundreds of millions) can seemingly vanish into thin air.
Can money buy happiness?
Our first case study is the King of Pop. When Michael Jackson died in 2009, he was reportedly over $400 million in debt. His debt payments alone were over $30 million per year. Michael Jackson lived very lavishly, and loved to spend money on jewelry, gifts, and art. His home was an amusement park. MJ had some ugly demons, and I don’t think anyone could say he was truly happy. Money clearly didn’t buy Michael Jackson happiness, but with the amount of debt he had, it sure looks like he tried.
Limited resources vs. unlimited wants
You or I might think that once we have a certain amount of money, we could buy everything we could ever possibly want. I don’t think that’s true. No matter how much money you have, there will always be something you don’t have. Speaking of things you don’t have, Kim Basinger bought an entire town in Georgia and declared bankruptcy 4 years later. Who needs a whole town anyways? Nic Cage blew his fortune on homes, automobiles, and rare artifacts. (Rare artifacts? Maybe as rare as…The Declaration of Independence?) If you’ve been wondering why Nicolas Cage is in so many movies nowadays, it’s because he’s trying to pay down his debt.
The point is most celebrities (and most people) are never completely satisfied with their wealth, and they can never get enough. There are always bigger houses, yachts, and private jets to purchase. The trap here is depending on money for your happiness; as long as money isn’t the main driving force behind your happiness, it’s possible to be completely satisfied with what you have, however little or however much that is.
Keeping up with the Kardashians
No matter how much money someone has, how wealthy they feel will probably be determined by how they measure up to their friends and peers. If you make more money than your friends, you probably feel good about your finances, and if you make less you probably don’t feel so good about money. How well you’re doing doesn’t matter as much as how well you’re doing compared to others.
A 2018 survey found that 39% of millennials have gone into debt to keep up with their friends. Although the survey singled out millennials, I’m sure this remains true to an extent for everyone, celebrities included. When we think of keeping up with the Joneses, we think of two middle class American families, with one having a nicer yard or a slightly bigger house than the other. But keeping up with the Joneses can also mean going $50 million into debt to buy a private jet to maintain the same standard of living as your peers.
No one wants to be the poorest in the friend group, so oftentimes we overcompensate so we aren’t seen for what we truly are. You’ve seen it before- the expensive jewelry, nice cars, and designer clothes. For many of these “luxury” brands, their main customers are those who can’t afford it. Usually it’s the wealthy person who wears the $40 pair of Levi’s while the person who can’t afford it is wearing the $600 pair of Gucci jeans.
So how did those celebrities go broke again?
The biggest trap some celebrities, or anyone else who has trouble controlling their spending, fall into is depending entirely on money for happiness. Money can affect your happiness, and if you don’t have any it can feel like the only thing that matters. But it’s important to focus on what money can’t buy, like friends and family.
If you have the mindset that once you reach a certain level of wealth (did someone say level of wealth? Watch our show on The 5 Levels of Wealth to see which stage of wealth you’re at) you will finally be happy, you’ll be chasing that elusive happiness for a long time.
The second biggest mistake someone can fall into is maintaining a lifestyle they can’t afford. Usually this is influenced by friends or family who may have more money or are also living a lifestyle they can’t afford. There is no shame in living within your means and a lifestyle you can afford; in fact, it should be a great source of pride.
Celebrities may seem completely different than “normal” people, but they fall into the same traps that everyone else does. By learning from their high-profile mistakes, you can keep yourself from making similar mistakes in your own financial life. If you’d like to learn about even more celebrity mistakes (and some success stories as well), check out our podcast on How to Live Like a Celebrity.