Wednesday, December 18, 2013

Celebrity Bankruptcy- A Lesson in Finances

Nothing catches the attention of the press quite like a celebrity wedding, except maybe a celebrity bankruptcy. There’s something captivating about watching someone go from a multi-millionaire to bankrupt in the space of one news article, and it leaves us wondering, “How did this happen?” It seems the bigger they are, the harder they fall, but celebrities who go bankrupt have mostly made the same types of financial mistakes that everyone else does, albeit on a bigger scale.

Living Within Your Means

To live within your means is to keep your expenditures each month lower than your income. It seems simple on paper, but many people struggle with this concept, even celebrities. In the case of the exceedingly rich, it seems their lavish lifestyle becomes an entity of its own, requiring more and more funding until it finally breaks the bank. For the average person, life changes, like the loss of a job, can turn a comfortable situation into an uncomfortable one very quickly. Living well within your means, leaving lots of wiggle room for savings, can give you a cushion in hard times that can protect against financial ruin.

Don’t Bank on the Future

Many of the most glamorous celebrity bankruptcies stem from one hit wonders and other flashes in the pan who were planning on being a lot more famous. They receive their first big paycheck, and plan a whole lifestyle around it, assuming that more is on the way. When their 15 minutes of fame are over, and the money stops coming in, they’re headed for bankruptcy court.

The lesson here for the common man is that you should never put yourself in a position where you’re spending money you haven’t been paid yet. If it looks like you’re about to secure a new contract, or your recent job interview went really well, do not take this as a sign that you can go out and blow your savings. Just pat yourself on the back, hope for the best, and continue living within your current means.

Supporting a Habit

Celebrities often cite supporting bad habits as reasons for their bankruptcy. They get in over their heads because of drugs, gambling or other high roller vices, and stop paying their other bills. While our bad habits might not be as newsworthy, they can still put us in a bind budget wise. Some of our unprofitable bad habits include things like using credit cards to purchase luxury items that we can’t afford, or prioritizing wants over needs.

Pay the Taxman

It seems like just about every big name celebrity bankruptcy includes an unfathomable amount of money owed to the IRS in the form of unpaid taxes. It doesn’t matter how important you are, Uncle Sam still takes his cut. When you fall behind in taxes, the IRS can seize your assets and garnish your wages in order to obtain what’s owed to them, and this can leave you with little or no money to pay your other bills, and headed for bankruptcy. The worst part is that bankruptcy doesn’t even include IRS debt in most cases, so you’ll still have to pay your taxes in the end.

The best thing to do is take a lesson from high profile celebrity bankruptcies, and avoid this and other pitfalls altogether.

Tiecen Anderson
In her former life, Tiecen worked in sales and marketing for a large insurance company. Before starting a family, she decided to switch gears and pursue a career that would give her a little more time at home. She finished up her degree from California Sate University in 2008 and started picking up work as a corporate web content writer. She enjoys learning new things every day as she works with a wide variety of clients, like Rulon T. Burton

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