Nearly every week, it seems there’s a new story about a celebrity running into money trouble.
A recent example, Gary Dourdan — the actor who formerly starred as a detective on “CSI” — filed for bankruptcy in August. Dourdan claimed almost $15,000 a month in earnings but only $321 in disposable income after paying bills and other obligations.
What is it about being a celebrity that seems to lend itself to financial woes? Here are a few of the biggest reasons that celebrities can’t seem to handle their money — and what we common folk can learn from them.
1. Ongoing extravagances
The careers that celebrities usually have aren’t like those most ordinary people experience. Rather than earning a stable paycheck you can count on month in and month out, jobs in acting, music, and professional sports have wide swings in earnings both on a month-to-month basis and throughout a career. As a result, many celebrities make the mistake of thinking that their top-earning years will continue indefinitely, and they spend money as if they’ll be able to sustain that high income long enough to pay down the massive financial obligations they take on. When careers end or popularity wanes, celebrities suddenly find themselves in way over their heads.
The lesson here is to be realistic about your career earnings potential. If you have a windfall year, don’t make changes that will boost your cost of living permanently. Instead, recognize that it may be a one-time event and keep living belowyour means.
2. Expensive entourages
Being a celebrity comes with expenses that most people don’t have to consider. Between security and bodyguards, pricey agents, and countless professionals ranging from accountants and financial advisors to lawyers and publicity staff, celebrities can go through million-dollar paychecks a lot faster than you’d think possible. Sometimes, the professionals whom celebrities hire turn out to be disreputable. But even honest advisors are costly, and when you add up all their bills, they can take a huge bite out of even substantial incomes.
You may never need a bodyguard, but watching expenses is still smart. For instance, if you’ve ever considered trying to boost your income by doing things like starting your own business, be sure to take into account the added costs of getting the help you need. Otherwise, you could end up digging yourself a deep hole before you ever get started with your new venture.
3. Bad planning
When money’s coming in hand over fist, it’s tempting just to let financial issues sort themselves out. But more often than not, celebrities looking back on their past mistakes can point to a lack of planning as the primary one…
Read More: Dan Caplinger, dailyfinance.com
