Celebrity Bankruptcy and You with Harvey Warren
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What Does Celebrity Bankruptcy Have To Do With You?
There are several notable people who have survived bankruptcy and gone on to make vast fortunes. The list is somewhat amusing including Abraham Lincoln, Walt Disney, Milton Hershey. They went bankrupt investing in business ventures. The point is, sometimes spending pays off, sometimes is does not.
Names like Nicholas Cage, MC Hammer, Mike Tyson, Willy Nelson, Larry King, Lawrence Taylor, and Donald Trump. These celebrities were not spending to build a business; they were just going nuts with their money and spent beyond their means. How does someone who makes $300 million end up in bankruptcy?
- They have no idea what these things truly cost. When you look at what happens with the celebrity bankrupts you know - just like you and me on a spending spree in the mall - they had no idea how much that private plane cost, what they were spending on their mansion, their Bentley and their entourage.
- They have no idea how much money they have and how much they are hemorrhaging. They are not watching what is happening with their credit cards. And they are also putting blind faith in an accountant that really isn’t looking out for them.
- They spend $301 million. If you spend more than you make, that will result in bankruptcy. Or said another way, not having a sustainable spending plan will absolutely result in your running out of money.
What does that mean for us?
It is really the same story, just with different numbers. It doesn't matter if you earn $25 million a year or $25,000 a year, the same budgetary rules apply. And I know everybody's eyes cross when you say the word budget, because as Robert Kyosaki of Rich Dad fame puts it, they see a budget as a straitjacket that tells you what you cannot spend. The more enlightened view of budgets has to do with making a spending plan that tells you what you can spend. The last one is the killer that catches everyone because like the celebrity, using your credit cards allows you to lose your connection with your spending. Having a clear and sensible "spending plan" is the way to get control of financial life.
A Final Piece of Cautionary Advice:
Even with all of these discounts, just remember this: you can’t do this stuff all the time. You do have to stay in your budget and save for these opportunities. You can’t do this every day, and the celebrities we mentioned early couldn’t either. That’s why they went bankrupt. In Europe there is a tradition where no matter what their income or budget, they always do one major extravagant thing for themselves a year. And they save for it and enjoy every bit of it. They’ve saved for it and budgeted for it, and that means they get to really enjoy it. It's a little gooey, but it is true. In the end, the best things in life really are free. A final word of advice to my celebrity friends - a Hollywood cliche' - spend the fame, save your money. Fame doesn't last.