Lessons Learned from the Formerly Rich and Famous
The media obsession with Michael Jackson continues unabated. I can’t figure it out. The white-gloved weirdo could sing and dance, sure. But he was a general failure at life, including his financial life. Much of his energy seems to have been exhausted on frivolous and reckless spending of money. Gobs of it. Why do we admire and even worship people like that?
At one time Jackson would have been considered wealthy. By the time all of the claims against his estate are resolved, I suspect it will be carcass-picking time for his children (whom he seems to have purchased from their biological parents during his continuous spending spree.) I feel bad for them but maybe they can now find an upgraded parental substitute.
Reading about Jackson and other members of the fraternity of the formerly rich and famous started me thinking: What do they have in common and what can we – the unrich – take away from their failed financial experiences?
Here are a few Mr. ToughMoneyLove thoughts on lessons to be learned from the formerly rich and famous.
1. Expect to be a One-Hit Wonder. For the Jacksons of the world, money follows fame. Fame can come and go almost instantly. So can the income. Be prepared. That means things like emergency funds, income generating assets, and insurance. Jackson had that at one time – his ownership of the copyrights in Beatles songs – but he leveraged that to death.
2. Don’t Fall in Love with Yourself. The famously rich are also prone to being famously in love with themselves (at least superficially) and pretending that others feel the same way. This plays out in the form of self-pampering and hiring legions of aides and helpers, most of whom do little or nothing beyond spending your money. The famously rich also have inflated assessments of their own abilities in general. This leads to poor decision-making in the world of finance. The “I deserve it” mentality is dominant in their lives. That’s bad for all of us.
3. Go with the (cash) Flow. The famously rich have high burn rates. Unfortunately, they are slow to adjust when income declines. Living in denial is not good for the balance sheet. We all should be willing and able to downsize our lives – rapidly – in response to negative economic conditions.
4. Have a Plan B. It always pays to have more than one marketable skill. Many of the rich and famous tend to focus exclusively on what made them famous. (See “one hit wonder”, above.) I say learn to do one thing well. Then while enjoying the benefits of exploiting that talent or skill, get to work developing the next one. If Jackson had played his cards properly with his Beatles portfolio, he never would have needed to work again.
Finally, if you follow professional sports, you know that another rich and famous person died this past week here in our town. Steve McNair, former NFL quarterback appears to have been shot by his 2o year old girlfriend in a murder-suicide. McNair was slowly in the process of becoming less rich and then infamous. He liked to spend lavishly on girlfriends – kept women if you will – even though he was married with four children. That’s called thinking with the wrong body part and it’s a sure recipe for personal and financial disaster. (See lesson 2 above.)
OK, that’s enough beating-up on the recently departed.
Do you see a pattern in the lives of the formerly rich and famous that we can learn from?
Photo credit: Dystopos