Lifestyles of the rich and the famous. Celebrities have more money than many of us can even imagine, but sometimes with more money comes bigger financial blunders. Here are the top celebrity money mistakes and how you can avoid them.
1. Selling Stocks Too Soon – Steve Jobs
If you decide to invest in stocks, choose stocks that you feel comfortable keeping in your portfolio for many years to come. Warren Buffet believes in the power of holding on to stocks, sharing advice like, “The stock market is designed to transfer money from the active to the patient,” and “If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes.”
Steve Jobs sold most of his Apple stocks when he was driven out of the company in 1985. He had lost faith in Apple and sold all of his stock except one share. Those stocks would be worth $66 billion today.
Even unluckier is Ron Wayne, one of Apple’s original founders, who sold his shares for $800 in 1976. Those shares were worth $35 billion in 2013.
2. Not Updating Your Will – Heath Ledger
While Ledger had a will, he didn’t update his will after his daughter, Matilda Rose, was born. Ledger’s death at 28 then left all of the Batman’s Joker’s assets to his father. There was some confusion among the family if Matilda Rose and her mother, Michelle Williams, would be taken care of after Ledger’s passing. Thankfully Ledger’s family said they would make sure the two were taken care of, but this is not always the case.
Writing down your last wishes on a napkin will not stand up in the court of law, so be sure to get a proper will made with an estate attorney if you have dependents or are considered upper-middle class.
3. Buying Too Much House for Your Budget – Rhianna
Even the super rich can get carried away with how much house they buy. Pop star, Rhianna, blames her accountant for faulty money management in 2009. He gave her the greenlight to buy a $7 million home when she only had $11 million in the bank. The 8,500-square foot home ended up being more than she could afford and was listed for over $2 million than what she paid for it.
Rhianna was able to bounce back easily from the mishap, and she now pulls in over $70 million a year. For the average home buyer, buying too much home for your budget can derail your finances drastically and even land you in deep credit card debt with a poor credit score.
4. Expensive Child Support – Terrell Owens
Professional football player and NFL’s 6-Time Pro Bowler, Terrell Owens, has had four children with four different mothers. While we aren’t telling anyone how many kids to have, it is important to realize how costly child support can cost.
Terrell Owens child support costs for four children cost $44,600 each month. If you pay child support, you can ask for payment modifications through the Office of Child Support Enforcement if your income drastically decreases or your ex’s income increases.
5. Failure to Pay Taxes – Jamie Pressly
Jaime Pressly, best known for her role in TV show, “My Name Is Earl” was handed a $260,000 tax lien in 2011. Three months prior, another tax lien of $282,000 was filed against here, and California filed a $95,000 lien against the TV star. In total, Pressly owes over $637,000 in back taxes.
Even if your tax bill is not as big as Pressly’s, it is still important to pay back taxes as soon as possible to avoid further financial and legal trouble. Can’t afford your tax bill? A personal loan with a low APR can help make the payments more manageable.
6. Business Debt – Kanye West
Last year, Kanye West, tweeted a series of requests to Facebook founder, Mark Zuckerberg, stating he was $53M in debt and wanted Zuckerberg to invest $1B in him to keep making art. For one of the most successful rappers in the world, $53M of debt seems incomprehensible. The debt is from West’s trying to launch his fashion line and for creating elaborate shows.
It’s okay to have big business dreams like Kanye, but it is important to know the costs and your five-year plan to succeed before diving head first into debt.
7. Foreclosure – Kristen Bell
“Veronica Mars” and “House of Lies” star, Kristen Bell purchased her seven-bedroom, Studio City, Calif. home in 2006 for $3.1M. The house was then foreclosed in 2012, with rumors that the star moved in with then fiancé, Dax Shepard.
Whether the foreclosure was a necessary financial move or not, foreclosures should be avoided if possible. A foreclosure remains on your credit report for seven years and can drop your credit score 200-300 points.
8. Bad Investments – Kevin Bacon and Kyra Sedgwick
Celebrity couple Kevin Bacon and Kyra Sedgwick lost millions of their personal savings through an elaborate Ponzi scheme in 2009. The Ponzi scheme was created by Bernie Madoff, a former NYC stockbroker and investment advisor.
The couple weren’t the only celebrities who lost money in bad investments. Larry King and Steven Spielberg were also affected.
9. Getting Married without a Prenuptial – Katy Perry
Not every marriage is meant to be. A divorce means more than a broken heart; it can be a financial disaster for both parties involved. Katy Perry and Russell Brand split at the peak of Perry’s career. She was worth $44 million dollars, and because the couple was wed in California, Brand was entitled to half of that fortune, since Perry did not have a prenup.
Thankfully, Brand did not want Perry’s money, and the two split ways amicably. Do you need a prenuptial even if you aren’t a celebrity? Findlaw says yes if you have more than $50,000 in assets besides real estate or earn more than $100,000 a year.
10. Lent Money to Family – Deidre Hall
Soap opera star, Deidre Hall, experienced her own financial drama when she lent her family and wardrobe assistant $800K in the mid-90s. Her family members and wardrobe assistant never paid her back, and she had to settle in court.
Let her story be a reminder that extra caution should be taken if family members or friends ask to borrow money. Yes, you want to help your loved ones when they are in financial need, but ask yourself if lending the money will truly solve poor money habits and if it will derail your own financial health.
You might not have the bank account of a celebrity, but all of us can fall victim to these 13 financial mistakes.