Let’s not forget Wesley Snipes owing 10 Million to the Feds. It’s called living outside of your means.
Earn 5 million dollars. Spend 6 million dollars.
Rinse.
Repeat.
Seems to me that if I was wealthy, I wouldn’t entrust my money to just one person. I’d spread it across a couple of investment groups, just to protect myself from that one bad apple who could singlehandedly wipe me out.
Don’t over estimate the power of peer pressure, either. People, IME, often make the mistake of assuming that they can afford to do whatever the people around them can afford to do. The problem, of course, is that the people around you may 1) have a much better financial situation than you or 2) be deeply screwed themselves. Since the range of wealth is probably wider in Hollywood than anywhere else (though the bottom of that range is still pretty nice), I’d expect this to be a problem there. $10 million can’t live like $100 million very long. If you are new to $10 million and you are looking to $100 million for your cues about how the rich live, you are going to get yourself in trouble.
True dat. My point was that smart people know what they don’t know and what they aren’t good at.
Frankly, if I won the lottery, I’d try to get Jim Cramer to manage a chunk of it. Say what you want about his TV persona, but he is a hell of a portfolio manager.
It really isn’t all that tough to manage big bucks. Even if all you do is find a mutual fund with a 30-year track record that earns 12%, you’ll earn enough to live off the interest. You’re a celebrity who hits the big-time on one sitcom that goes for 5 or 6 years & nets $5 million. You could comfortably live off $500K a year in interest as your gross income without much problem.
You’re right of course. I actually looked it up to make sure I had the right one and then I wrote it wrong anyway.
The other thing is that many famous people have a lot of free time. Much of what keeps regular working people from spending too much money (relatively) is that they are work much of the day. It’s kinda like being on vacation all the time. You eat out more, buy shit you don’t need, etc.
It’s easy. People don’t know crap about money. Most rich people got rich by working real jobs and taking very good care of their money. People who luck into money either by winning a lottery or by having a hit t.v. show usually don’t know crap about money and investing.
I read study a while ago that tracked people who won a lump sum of money greater than one million over 5 years. Something like 85% of the people who won a cool million or more were back at their normal jobs after 5 years.
If you have 1 million and make 10% in investments you get 100,000 per year. Take out taxes and you are down to about 80,000 (maybe less, I am not sure of the top tax rate on investments) . Now, assuming you have an investment adviser, they’ll take a bunch of that. So you can quickly get down to 50,000 a year net, which ain’t bad at all to live on assuming that you don’t go out and buy a new house, car, boat, plane, etc. The problem is that they get some money and then take their new Ferrari out of their new 20 car garage to drive to their new yacht so they can impress their friends with how rich they are*. Of course the new house, Ferrari and yacht came out of the principal, not the returns on the investments, so the next year instead of earning 100,000 off of one million they had they earn 50,000 off of 500,000 they have left. Do that a couple more times and you are broke.
Now some of these folks, both actors and lottery winners, get smart and either learn about investing or pay someone to do it. The problem with paying someone to do it is that you have to watch rather carefully so that the investment adviser doesn’t rob you blind and man, they will try.
Slee
*Note, I think entirely too many people who get money run out and buy stuff to impress others. There are a good many people however who do manage their money well.
Honestly, that’s probably more because a million isn’t really that enormous an amount these days. And because they were bored, and typically workaholic Americans, and because a million is small enough that a normal paycheck added to it actually makes a difference. I also recall reading a study ( but don’t have a cite any more than you do unfortunately ) that people who won money that way did as well as people who earned it, and better than those that inherited it. There’s a certain tinge of the American attitude that wealth reflects moral worth involved here; that they’d have earned that money instead of won it if they weren’t lazy and self indulgent.
Not really surprising, especially on the lower end.
$1,000,000 before taxes = $580,000 to $660,000 AFTER taxes, depending on your state income tax.
Nowadays, that’s not much, certainly not enough to live on for the rest of your life (unless you’re already near retirement age). At best you’re talking about buying a house or paying off your mortgage, getting a new car, sorting out all your crap and maybe taking a year or two off to do some travel before going back to work. Or taking the opportunity to go back to school and prepare for a new career.
Then of course, there’s the obligatory “Second cousin twice removed on your mother’s side (who you’ve never met) who desperately needs a handout” pile-on, and how well you deal with that pressure.
I believe Madonna is another celebrity too wise to make ducks and drakes of her money. ISTR reading that she invested wisely and conservatively.
I’ve pulled some credit reports on young rappers, and the amount of credit they get is unbelievable. Everybody is wlling to extend you credit, often at very high rates. If you don’t know better, you think “Wow. Good Deal.”
Three years later the well runs dry and they are stuck with millions on credit cards.
Strictly speaking, is that entirely legal?
I disagree with that. It’s very difficult to grow rich by working a job. Athletes and movie stars are some of the few people who can do it. The more typical route to wealth is making good investments.
I work in real estate. If they give me the information and sign the waiver, not only is it legal, it can be very, very interesting!
Most rich people got rich by being pulled out of the proper set of genitalia.
I’m sure there are some very legitimate expenses with being a celebrity. Housing was mentioned. If you want to get those parts (and aren’t an “A” list actor), you have to be where you can network and audition. So that means living in L.A. or at least close by. So that’s going to be expensive as all get out right there.
What about insurance? What coverage do you get as a SAG member? Do you have to have your own insurance? Hell are you even insurable if you’re wealthy? Or do insurance companies say “screw you pay for it yourself”?
Then there are things like personal trainers, nutritionist, vocal coaches…stuff like that. If your job is to be able to act like you can do a bunch of things, then you have to learn at least the basics. I remember Will Smith talking on Oprah once about how he went to a well known boxing trainer to get ready for his role in Ali. So I’m assuming that he had to pay that guy to work with him. So those all add your your expenses. Some with no guaruntee that they’ll actually have a return on investment.
So I think a lot depends on if you want to be a career celebrity. If you don’t really care to make that your lifetime career, I think it’s a lot easier to set your money aside or invest it wisely.
Jackie Coogan (aka Uncle Fester) is the prime example of kids being in the business and then having nothing as a result of poor money managment. That his parents were the ones that screwed him is just all the more galling. He’s also the reason there are laws concerning the money paid to child actors.
From what I can recall, Fred MacMurray was rich as all hell through wise investments during his film career, mostly in real estate. He also had a clause in his “My Three Sons” contract that stipulated he only had to work a minimal number of days a month, got all his scenes done first, and had huge residual payments.
False