Lessons Learned from the Formerly Rich and Famous

July 8, 2009 by  
Filed under Money and Behavior

rich_famousThe 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. 

Jackson is only one of many celebrities who belong to the fraternity of the formerly rich. As this article points out, the entertainment and professional sports industries are well represented by broke people, including one of Jackson’s sisters.

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

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6 Responses to “Lessons Learned from the Formerly Rich and Famous”
  1. sekishin says:

    Regarding #2 above: I can only imagine how Michael Jackson felt about himself prior to his fame (at an early age) and how very sad he must have felt when alone (lonely is different) with himself. Without all the objects he purchased and absent of the adoring millions of fans cheering him, I can only assume it was unbearable to be . . .

  2. My Journey says:

    I would also add,

    #5) Just because you can sing, dance, play football does not mean you know what you are doing when it comes to investments – get a trusted advisor BUT MAKE SURE HE OR SHE CAN BE TRUSTED.

  3. MasterPo says:

    Regarding #3 it’s the same with sports figures in that these are usually little more than kids when they get million dollar deals. They never learned how to manage money or the pain of working hard for what you have and wanting to keep ti (you hear that Rick and SJ!).

    I liken it to the stories of people who win multi-millions in the lottery. A huge number of them are dead broke again with in a year or so.

  4. Rick Beagle says:

    I am wondering how you folks expected a five year old to develop all of these skills? If his parents had been better and his talent a lot less, then perhaps he wouldn’t have been in such bad shape.

    Considering my comment, perhaps we should have a number five about family and friends. It is sad, but when you move into an extreme wealth bracket like MJ did, it is hard to discern love from greed.

    A lot of people have difficulties understanding the difference between hard well earned money, and the absolute worship of it. The difference between looking at money and seeing something else such as a college education for your children, rather than throwing it onto the floor and rolling around in it. The difference between taking that money and planting a flower garden, rather than investing it in a company that wants to cut the top of a mountain off (thereby polluting the area for generations). There are people who understand why they work hard for their money, and then there are those that the sum of them begins and end with their money.

    I used to work with a woman who did not have children and literally gave a great deal of time and money to our local schools. When asked about it, she responded rather flippantly to me: “I figure (she says) that every child I help is one less child likely to grow up and mug me.” While humorous, the comment belies an important tenet of the Liberal thought process. If you invest, and make opportunities for people, they will rise to the challenge (not all, but most) and at the end of the day, they will provide far more to our community (taxes, community service, etc.) than our original investment. Conservatives see one dead beat and declare the whole investment process a sham (designed to separate their beloved money from their wallet), and then go back to their homes to count their many coins all the while crying about the state of the world they helped create.

    Rick Beagle

  5. About #4, it’s hard to imagine how a grotesque creature like Jackson could manage a plan B, having started as a kind of child prodigy and focused the totality of his energy and talent on his performance, public & private (which were, after all, the same thing).

    The only strategy I can deduce from experience of the rich & the famous is that if you must be rich, try to avoid being famous. 😉

  6. lurker carl says:

    I used to feel sorry for MJ but he could have easily made some better decisions and choices in his personal life to avoid the trials and tribulations that dogged him during the last decade. Sometimes the Madonna method of keeping your name on the public’s tongue isn’t the best way of staying in the limelight. Rosanne can testify to that.

    As far as getting trusted advisors go, you usually have to go through a lot of losers to find them. Rich and famous or poor and obscure, excellent employees are truly hard to come by – most people are better off handing things themselves. But you can not build an empire by yourself. Many folks are not able to tell the good folks from the bad until it’s too late. Best of luck finding a Suze Orman to handle your affairs when you can not do it yourself.

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