I’m always amazed at the attention and awe that the public attributes to celebrities. Whether that person is an actor, musician, athlete or business titan such as Donald Trump, the public’s fascination borders on fanatical. In reality they are full of human flaws just like each of us but because they are so much in the public eye maybe we can learn lessons from their mistakes.
Allen ‘The Answer’ Iverson. Iverson earned an estimated $150 million while playing for the National Basketball Association. Add another $50 million endorsement deal from Reebok plus other deals cashing in on his name and you have quite a tidy sum of money. Most people would agree that’s enough money to last several lifetimes but even the mega-income earners must follow the rules. A Georgia judge recently placed a lien on his bank account to satisfy an unpaid $860,000 jewelry store bill. Fellow players said he never carried luggage on road trips but rather bought all new clothes and shoes, then discarded them so he wouldn’t have to lug them home. While he has not filed for bankruptcy protection, it is reported that he has managed to run through nearly all of his money. Clearly Mr. Iverson didn’t have ‘the answer’ when it came to managing his financial affairs.
Mike Tyson. One super athlete who did go bust was boxer Mike Tyson. His earnings in the ring exceeded $300 million but a combination of lavish lifestyle and poor investments eventually drove him to file for bankruptcy.
Lesson: In both cases these athletes failed to recognize the importance of financial planning for careers that are guaranteed to have a short timeline. As average folks, we plan for retirement thirty to forty years in advance, systematically setting aside ten to twenty percent of our pay so we can build enough wealth to last us for twenty or so years of retirement. In their cases, they should have been setting aside thirty to fifty percent of their after-tax money given their short professional careers and knowing that their next job will likely pay a fraction of their former.
Kim Basinger. A former model and one of the most beautiful actresses of her time, Kim Basinger filed for bankruptcy in 1989 after being persuaded to buy a small town in Georgia for $20 million. Her intention and that of her partners was to turn the town into a Hollywood glitz-styled tourist attraction. The deal imploded when she was sued for breach of contract for failure to appear in a film that resulted in an $8.1 million judgment which she was unable to pay.
Lesson: First, pick your partners carefully and when you enter into high-level investments be sure to isolate the risks using any number of asset protection strategies such as forming a corporation or Limited Liability Company. Also, if you enter into a written agreement, carefully consider the consequences of breaching your commitments under the contract. The results can be devastating. The silver lining to this story was that her case was thrown out on appeal and she later settled with the film studio for $3.8 million. Final lesson…towns are to be visited, not bought!
Walt Disney. Walt Disney went bankrupt at the ripe old age of twenty-one when he tried to launch an animation studio to produce Alice in Wonderland. Undeterred, he went on to build an entertainment empire that has thrilled millions of people from all over the world and that last year had revenues of $38 billion.
Lesson: Never give up on your dream!