The financial missteps of celebrities are the stuff of tabloid headlines, and while the average taxpayer may see them as little more than entertainment, there are five good lessons to be learned. The likes of Willie Nelson and Leona Helmsley have demonstrated that paying taxes is always wise, and Uma Thurman and Billy Joel showed that money managers should not always be trusted. Other stars have taught taxpayers to live within their means, protect themselves in their marriages and keep their wills up to date. For more on this continue reading the following article from TheStreet.
We all hear about it when celebrities make money mistakes, because they’re often big, expensive, headline-making mistakes. But what’s the takeaway for the average Joe? For lessons learned, click on:
Pay your taxes
When talking about taxes, back taxes and tax evasion, names such as Willie Nelson, Leona Helmsley, Marc Anthony, Richard Hatch (remember him from Survivor?) are just a few names that come to mind. Understand that there are only two things in life that are certain: death and taxes! You must file your taxes every year on April 15. If you can’t make that deadline, you can always file for an extension (an extra six months to get it together), but even so, that’s just an extension to file. If you owe the government money, you have to pay your best estimate — within 90% accuracy — of what you think you owe April 15 or you’ll be hit with interest and penalties on any balance due.
Know and investigate where your money is going
Uma Thurman was taken for a million dollars by financial adviser, Kenneth Starr; Billy Joel filed a $90 million lawsuit in 1989 against his ex-manager claiming he committed fraud and used him as a "personal bank." The takeaway: Don’t trust just anyone with your money — whether your broker, financial planner, car dealer or even your mortgage lender — without doing the proper amount of due diligence.
Live within your means
When you think "living beyond your means" you think big, fancy homes. And this is where so many celebrities have gotten into trouble over the years. Among those either in foreclosure or teetering on the brink: Nicolas Cage, octomom Nadya Suleman and several members of the cast of Real Housewives. Remember — housing costs should not exceed 25% to 28% of your monthly income. Before you buy, run the numbers using Zillow’s affordability calculator and monthly payment calculator.
Protect yourself when going into marriages
Paul McCartney didn’t have a prenup when he married Heather Mills, and his divorce from her in 1998 was one of the costliest on record: about $50 million dollars. Granted, you probably don’t have that kind of money, but the bottom line is that prenups are not just for the rich and famous anymore. In fact, more people of all income levels are using them today to protect their hard-earned money. According to some estimates, by 2020, half of all marrying couples will get them! Good idea, given that 50% of marriages end in divorce and 60% of second marriages do.
Update your will
The late actor Heath Ledger reportedly had a will, but it was written three years before his daughter, Matilda, was born. So she was left out. Update, update, update — particularly when there’s a major life change, such as marriage, divorce or the birth of a child.
This article was republished with permission from TheStreet.