An increase in assets doesn’t come with an increase in financial acumen. Financial Literacy Month is a great time for us all to expand our knowledge. It’s also a great time to raise awareness of the many scams, frauds, or predatory lending practices that affect too many families every year.
Sometimes we analyze “best practices” as a way to learn a new behavior, but today, we’re taking the opposite approach. As Eleanor Roosevelt once said, “Learn from the mistakes of others. You can’t live long enough to make them all yourself.”
Here are five examples of wealthy celebrities who have gone through ups and downs financially. While some of these stories are extreme, each reinforces the need to live within your means and to have trusted advisors in your corner.
- Mike Tyson
The former heavyweight champion earned over $400 million throughout his career but filed for bankruptcy in 2003.1 Tyson allowed others to control his finances, didn’t review his bank statements, and overspent on things like cars, jewelry, and exotic animals. He admits that his financial illiteracy and trust in others led to most of his financial issues. Some of his most interesting purchases include:
- $580,000 on a birthday party2
- $2mm on a golden bathtub3
- Kim Basinger
The actress won an Oscar and earned millions of dollars during her career but filed for bankruptcy in 1993.4 Basinger invested heavily in a town in Georgia, hoping to turn it into a tourist attraction. The venture failed, and she lost millions of dollars. Her most interesting purchases include:
- $20mm on the town of Braselton, GA4
- $7.4mm for backing out of the movie “Boxing Helena”5
- Nicholas Cage
The actor earned over $150 million throughout his career but filed for bankruptcy in 2009.6 Known for his extravagant spending habits, Cage bought 15 homes and a wide variety of yachts and cars. He also failed to pay taxes on some of his properties, leading to a $14 million tax bill.7 Some of his most interesting purchases include:
- $150,000 on a pet octopus8
- $276,000 on a dinosaur skull6
- Johnny Depp
The actor has experienced significant financial troubles over the years, largely due to his extravagant spending habits and legal battles.10 In 2020, it was reported that Depp had sold off many of his assets, including a number of homes and his prized art collection9, in an attempt to pay off his debts. Some of his most interesting purchases include:
- $30,000 a month on wine11
- $3 million to blast Hunter S. Thompson’s ashes out of a cannon.11
- MC Hammer
The rapper earned over $30 million during his career but filed for bankruptcy in 1996.12 Hammer overspent on things like $30 million renovating a $12 million mansion, luxury cars, and a private jet.12 He also had a large entourage that he paid for, further draining his finances. Some of his most interesting purchases include:
- $500,000 a month for a 200-person staff12
- A 200-room mansion
While it’s interesting to examine the spending habits of others, especially those on the extremes, it’s more important to examine the choices we make in our lives. It’s also important to remain a student of finance—to never stop learning and growing.
How can you increase your financial literacy? Here are some specific steps you can take:
- Read financial publications: Stay informed by regularly reading publications like The Wall Street Journal, Forbes, and Bloomberg.
- Take courses or workshops: Consider taking courses or attending workshops on financial planning, investing, and other related topics.
- Attend seminars: Attend financial seminars and conferences to learn from industry experts and network with other investors.
- Work with a financial advisor: A trusted financial advisor can provide guidance and help you make informed decisions about your wealth.
Remember, financial literacy is not a one-time achievement but an ongoing process of learning and improvement. By continuously educating yourself and practicing good financial habits, you can avoid the pitfalls that befell many of these celebrities.