Five Celebrity Money Fails
Celebrities may dictate fashion and style, but they’re no arbiters of personal finance, at least not in my book. If there’s one thing about money that celebrities have taught us, it’s that you can just as easily burn through 10 bucks as you can several million when you don’t stop to embrace the basic rules of money. You know the plain vanilla stuff like: saving, budgeting, planning and protecting your assets. Oh, and it also helps to file and pay your taxes.
Here are five celebrity financial faux pas that they likely could have avoided by tracking expenses in good finance management software, starting with the most recent by a Baldwin brother.
1. Going Overboard. Across the country bankruptcy filings are on the rise – up 40% in the last month – and B-list actor Stephen Baldwin, most recently known for the I’m a Celebrity…Get Me Out of Here reality show, is no stranger to Chapter 11. He and his wife recently filed for bankruptcy protection in New York, citing more than $2.3 million in debt, mainly stemming from two overdue mortgages. The Baldwin couple is reportedly also $70,000 in credit card debt and owes Uncle Sam roughly $1 million in back taxes. Baldwin joins a celebrity bankruptcy hall of fame, which most recently inducted former baseball pro Lenny Dykstra. Other famous names who’ve gone bankrupt: Tom Petty, MC Hammer, actress Kim Basinger (who coincidentally was once married to Baldwin’s brother Alec), and get this – even Abraham Lincoln in 1833. It turns out the 16th President was behind on paying back some friends who’d lent him money to start a business.
2. Blind Trust. You have to do your due diligence before handing over your money to a “professional,” even if they come referred. One notorious case of financial fraud was perhaps that of Dana Giacchetto, the scamming money manager to wealthy Hollywood glitterati including Leonardo DiCaprio, Cameron Diaz and Matt Damon. In 1999 roughly $10 million of client money went missing from Giacchetto’s investment firm Cassandra Group. Of course, that now seems like pennies when you think of the $50 billion Bernie Madoff swindled from his clients and many everyday folks. Some famous names, however, also got caught in the scandal and experienced trauma in their personal finance situation, including married actors Kevin Bacon and Kyra Sedgwick.
3. Mixing Money with Family and Friends. There’s more pressure now to lend money to needy friends and family in the recession, but if there’s anything that’ll potentially mess up a relationship it’s money. If you don’t mind ever getting paid back for your “loan,” go for it, and help out a friend. But that’s a pretty tough commitment to make, even for millionaires. Just ask Oscar-winning actor Richard Dreyfus who earlier this year filed a lawsuit against his dad and uncle for never repaying the $4 million loan he’d given them in the 1980s. He later dismissed the case, but I bet Thanksgiving will be really, really awkward this year.
4. What Prenup? While it seems ridiculous to even think about the d-word when you’re in love and planning a wedding, a prenuptial agreement can be an essential legal tool for protecting your assets in the event of a divorce. Wouldn’t comedian Roseanne Barr like to turn back time and make her then fiance Tom Arnold sign a prenup in 1990? Four years later, their divorce cost Barr (and earned Arnold) $50 million. That is a big change in one’s online personal finance figures!
5. Taxes, Shmackses. No one’s too cool for the taxman. Well, maybe except White Men Can’t Jump star Wesley Snipes, who is currently in prison for failing to file tax returns. Country singer Willie Nelson also evaded his taxes. In 1990, he received a bill from the IRS totaling more than $16 million in back taxes. He managed to pay off his tax debt by 1993.