Monday, July 22, 2013

When Stars Go Broke

A Cautionary Tale

The entertainment industry is a very unscrupulous place. Many stars do not make much money, as greedy managers sometimes take ridiculously high commissions. While in some cases, stars do make a lot of money, but spend too much and fail to meet their financial obligations, such as paying taxes.

When you start making money one of your first priorities should be putting aside money for taxes. You have to pay the state. That’s just how it works. Not paying is more costly than actually paying, as fines and penalties will accrue and a potential jail sentence and the type of negative publicity that hurts careers.

One has to have a business plan. How to make one’s income grow and last. One should always double check with other sources, information given to you by your business manager and accountant, as not everyone is honest.

If you buy a house, have it properly checked for defects and accurately appraised. If you invest in a business, double check all the projected financials and the business histories of those involved in the enterprise. Be careful getting into business with family and friends. Lay down ground rules to let them know business is business, professionalism is imperative and not to take any liberties or things for granted.

Do not overextend yourself counting on money you haven’t made yet to get you out of any potential trouble. Look at what you have now in the bank as what you have. Don’t bank on future earnings as anything can happen and derail it.

Many stars spend too much money, like the cash flow will always be there, when for many it will not be. Going out to clubs and buying expensive bottles of liquor and or "making it rain" via throwing money around for others to pick up, is fiscally irresponsible.

Repeatedly buying expensive clothes and jewelry, purchasing costly cars and taking lavish trips are sure ways to go broke. Spending money on luxury homes and car rentals, expensive liquor and high priced dinners is another way to lose your money. You can treat yourself, but not all the time if funds are limited. Always work with what you have, not what you hope to or think you will financially make.

The most sensible thing one can do is purchase a house or apartment (flat), even if it is a fixer upper in a modest neighborhood – hey at least it’s yours – and you can renovate and add a room or two to it (a house) as funds become available.

My late godmother’s husband, Clement Coxsonne Dodd, ran a successful record label with his wife while he was alive and even signed Bob Marley to his first record deal. They released a number of groundbreaking recordings, as Coxsonne is the man that started reggae. He knew the value of labor, having worked in sugarcane fields in America to earn and save money to start his label in Jamaica.

My parents have spoken about it over the years, stating it is a curious thing to watch what some artists spent their royalty checks on. Rather than saving or investing their money, some entertainers chose to buy flashy cars and expensive clothes that eventually go out of style, trying to live up to public opinion of what a star should be and have to their name. Then later, some wound up with little or nothing over poor financial choices. It’s a pattern that has repeated itself at many record labels and film studios around the world.

You can’t force people to make responsible financial decisions, but you can warn them. Some will listen and be better off for it, while others won’t and will meet with financial calamity and ruination.