Tough economic times have tested the vast majority of Americans - and that includes celebrities. Lately there have been several high profile individuals from the worlds of sports, entertainment, and the arts who have seen their financial woes hit the front pages. A money meltdown is right up there with death and divorce as one of life's most stressful experiences. So let me say straight up that my intent in highlighting these experiences is not to poke fun or make light of their situations. Rather it is to help others by highlighting common financial pitfall that all of us (myself included) can learn from.
- NBA Star Antoine Walker - Broke & In Big Trouble: During a successful career spanning 12 years, Antoine earned over110 million. Now it's gone. At age 33, Antoine has creditors chasing after him and is facing felony check fraud charges. Much has been made of his bling (the cars, watches, entourage). However, he was also by many accounts extremely generous with friends, family and those in need. Antoine's problem was that he spent as if his peak earnings years would repeat every year. He's not alone. Many people with variable incomes (commission-based sales people, entrepreneurs, etc.) fall into this trap. What we all can learn is if you have a volatile income stream, you should spend based on your average, or even trough, earnings to avoid a cash crunch when leaner times appear.
- Bestselling Mystery Novelist Patricia Cornwell - Looking for40 Million: This prolific, smart, and highly popular writer has suffered losses estimated in the range of40 million. She's suing the money management firm that handled her money, arguing they didn't heed her instructions to "invest conservatively" and even cut checks for gifts given to people she didn't know. Patricia's problem was that she handed over complete control of her finances to her advisers. As it frequently takes single-minded devotion to one's craft to excel, the need for some delegation is understandable. What we all can learn is when it comes to your money, your motto (to quote President Regan) should be "Trust, but verify." Remember, no one will ever care about your money as much as you do. So you must stay involved, even if you have an adviser.
- Uber-talented photographer Annie Leibovitz - Fighting to Keep Her Home: This American icon has taken some of the most famous photos... ever. From John Lennon & Yoko Ono (hours before he was shot) to a very pregnant (and very bare) Demi Moore, that was Annie's work. In the go-go years Annie's day rate was rumored to be $250,000. Today she is $24 million in debt and is a single mom of three young children fighting to keep her home. Annie's problem was spending liberally and borrowing aggressively against the equity in her home to make up the difference. When the credit markets seized up, she found herself in a cash flow crunch, and resorted to putting up her homes and copyrights to her lifetime work up as collateral for a loan. Now, that collateral may be called in. What we all can learn is that debt really is a four-letter word. Borrow at your own risk and understand that there will be consequences if you can't pay it back.
- Famed Actor Nicholas Cage - Owes Over $6 Million in Back Taxes: This super talented actor owes the IRS. Big time. Uncle Sam wants over $6 million in back taxes from Nicholas Cage. The vast majority stems from the 12 million-ish in income he earned in 2007 that apparently he did not pay taxes on. Nicholas's problem is that he appears to be cash-strapped when it comes to paying those takes. What we all can learn is that if you are self-employed, as so many more of us are these days, it's vital to set aside money for taxes at the time you earn that income.