Celebrity Money Mistakes We Can All Learn From
We all hear about it when a celebrity has a big, expensive, headline-making money mistake. But what’s the takeaway for the Average Joe?
1. Pay your taxes.
When talking about taxes/back taxes/tax evasion, names like Willie Nelson, Leona Helmsley, Marc Anthony, Richard Hatch (remember him from Survivor?) are just a few names that come to mind. Understand that there are only two things in life that are certain: death and taxes! You must file your taxes every year on April 15th. If you can’t make that deadline, you can always file for an extension, which gives you an extra six months to get it together. Even so, that’s just an extension to file. If you owe the government money, you have to pay your best estimate—within 90% accuracy—of what you think you owe on April 15th or you’ll be hit with interest and penalties on any balance due.
2. Know and investigate where your money is going.
Uma Thurman was taken for a million dollars by financial advisor, Kenneth Starr; Billy Joel filed a $90 million lawsuit in 1989 against his ex-manager claiming that he committed fraud and used him as a “personal bank.” The takeaway: don’t trust just anyone with your money—whether your broker, financial planner, car dealer, or even your mortgage lender—without doing the proper amount of due diligence.
3. Live within your means.
When you think “living beyond your means” you think big, fancy homes. And this is where so many celebrities have gotten into trouble over the years. Among those either in foreclosure or teetering on the brink: Nicolas Cage, Octomom Nadya Suleman, and several members of the cast of Real Housewives. Remember: housing costs should not exceed 25-28% of your monthly income.
4. Protect yourself when you’re getting married.
Paul McCartney didn’t have a prenup when he married Heather Mills, and his divorce from her in 1998 was one of the costliest on record: about $50 million dollars. Granted, you probably don’t have that kind of money, but the bottom line is that prenups are not just for the rich and famous anymore. In fact, more people of all income levels are using them today to protect their hard-earned money. According to some estimates, by 2020, half of all marrying couples will get them! Good idea, given that 50% marriages end in divorce, and 60% of second marriages do.
5. Update your will.
The late actor Heath Ledger reportedly had a will, but it was written three years before his daughter, Matilda, was born. So she was left out. Update, update, update! Particularly when there’s a major life change, such as marriage, divorce, or the birth of a child.
Vera Gibbons is a financial journalist based in New York City and is a contributor to Zillow Blog. Connect with her at http://veragibbons.com/.