The money, fame and apparent happiness of celebrities causes many people to wish for the life of the rich and famous. But the notion that all celebrities live on easy street is just a facade. Masked by high-end clothing, big houses and fancy cars, in many cases the grass only looks greener on their side. It often comes as a surprise when the spending habits of famous people are shown to be in line with the average American — often spending more than they can afford and building up huge amounts of debt. We can’t help but wonder how a huge fortune could lost or wasted, and assume it would never happen to us.
There are plenty of big name celebrities who have found themselves in deep trouble with unpaid debt in the hundreds of thousands (or millions!) of dollars. Nicholas Cage is just one example of an out-of-control celebrity, with spending that went unabated. At the top of his career he was pulling in $20 million per film, but it still wasn’t enough to cover is outlandish spending, including a private island, jet and multiple mansions and castles.
A matter of perspective
Debt occurs when expenses exceed income, a common situation for Americans no matter what their level of income. When a celebrity hits it big and the paychecks start rolling in, sound financial advice isn’t always immediately available. The damage occurs when exorbitant spending goes from isolated incidents to a must-have lifestyle. Making more money triggers more spending; a bigger income buys a larger mortgage. The extravagance is apparent when celebrities buy small towns (Kim Basinger), pet tigers (Mike Tyson) and investment properties like hotels (Debbie Reynolds). Many of those who do strike it rich are suddenly so deep in wealth they don’t consider the fact that they will reach a peak in their income.
Bankruptcy option less viable
Many affluent people live with the same concerns and stresses over money as the average suburbanite who is struggling to get by on two modest incomes. With dwindling assets, mounting expenses and poor investments, there is just no way to recover from the free-fall of debt and many resort to filing Chapter 7 bankruptcy. Once an easy way for debtors to wipe the slate clean and basically avoid paying their bills, the Fed tightened restrictions in 2005 and made it more difficult for debtors to qualify for Chapter 7. Now subject to a ‘means’ test, filers making a specific amount of income are forced to file under Chapter 13, which in essence requires some or all of their debt to be paid by the consumer. A bad deal for everyone!
Ways to get debt under control
Perhaps the biggest obstacle to get over is the idea that there is someone or something to blame for your predicament. The rich and famous are in the same boat as everyone else when they procrastinate and blame others for their situation. And while it’s true that there are some things they can do personally, like spend less, use cash or consolidate loans, sometimes calling an expert is the quickest way to see results. No matter what your level of income, there are credit counselors and other groups who can help with shopping addictions and other habits and behaviors that are contributing to the problem. These experts can point out changes that need to be made that may not be obvious when you evaluate yourself.
It may seem ludicrous that a wealthy celebrity could have problems with debt, but they fall into many of the same traps as you and me. Although there are a wide array of reasons people have issues with debt, the blame ultimately falls on the person making and spending the money. No matter how much money you make, creating a budget and being disciplined are keys to long-term financial security.
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