Frank Johnson | May 1, 2023
This article is reprinted with permission from Esq. Wealth Management, Inc.
It is common to examine “best practices” in order to pick up new behaviors, but today we’re going in the opposite direction. To borrow a quote attributed to Eleanor Roosevelt, “Learn from the mistakes of others. You can’t live long enough to make them all yourself.”
In this article, we examine the financial decisions affecting five wealthy celebrities who have gone from riches to rags. EsqWealth encourages clients to live within their means, to be financially literate, and to surround themselves with competent advisors. Those lessons are reinforced by each of these experiences.
1. Mike Tyson
The former heavyweight champion earned over $400 million throughout his career but filed for bankruptcy in 2003.1 Tyson allowed others to control his finances, didn’t review his bank statements, and overspent on things like cars, jewelry, and exotic animals. He admits that his financial illiteracy and trust in others led to most of his financial issues. Some of his most interesting purchases include:
- $580,000 on a birthday party2
- $2mm on a golden bathtub3
2. Kim Basinger
The actress won an Oscar and earned millions of dollars during her career but filed for bankruptcy in 1993.4 Basinger invested heavily in a town in Georgia, hoping to turn it into a tourist attraction. The venture failed, and she lost millions of dollars. Her most interesting purchases include:
- $20mm on the town of Braselton, GA4
- $7.4mm for backing out of the movie “Boxing Helena”5
3. Nicholas Cage
The actor earned over $150 million throughout his career but filed for bankruptcy in 2009.6 Known for his extravagant spending habits, Cage bought 15 homes and a wide variety of yachts and cars. He also failed to pay taxes on some of his properties, leading to a $14 million tax bill.7 Some of his most interesting purchases include:
- $150,000 on a pet octopus8
- $276,000 on a dinosaur skull6
4. Johnny Depp
The actor has experienced significant financial troubles over the years, largely due to his extravagant spending habits and legal battles.10 In 2020, it was reported that Depp had sold off many of his assets, including a number of homes and his prized art collection9, in an attempt to pay off his debts. Some of his most interesting purchases include:
- $30,000 a month on wine11
- $3 million to blast Hunter S. Thompson’s ashes out of a cannon.11
5. MC Hammer
The rapper earned over $30 million during his career but filed for bankruptcy in 1996.12 Hammer overspent on things like $30 million renovating a $12 million mansion, luxury cars, and a private jet.12 He also had a large entourage that he paid for, further draining his finances. Some of his most interesting purchases include:
- $500,000 a month for a 200-person staff12
- A 200-room mansion
While it’s interesting to examine the spending habits of others, especially those on the extremes, it’s more important to examine the choices we make in our lives. It’s also important to remain a student of finance—to never stop learning and growing.
How can you increase your financial literacy? Here are some specific steps you can take:
- Read financial publications: Stay informed by regularly reading publications like The Wall Street Journal, Forbes, and Bloomberg.
- Take courses or workshops: Consider taking courses or attending workshops on financial planning, investing, and other related topics.
- Attend seminars: Attend financial seminars and conferences to learn from industry experts and network with other investors.
- Work with a financial advisor: A trusted financial advisor can provide guidance and help you make informed decisions about your wealth.
Remember, financial literacy is not a one-time achievement but an ongoing process of learning and improvement. By continuously educating yourself and practicing good financial habits, you can avoid the pitfalls that befell many of these celebrities.
1 Thomas, Mike. “Mike Tyson Reveals the Shocking Way He Emerged From Bankruptcy.” Sportscasting. https://www.sportscasting.com/mike-tyson-reveals-the-shocking-way-he-emerged-from-bankruptcy/. Accessed 14 March 2023.
2 SK Desk. “Mike Tyson Net Worth.” Sportskeeda. https://www.sportskeeda.com/mma/mike-tyson-net-worth-2021. Accessed 14 March 2023.
3 Brown, Steve. “Five Lending Tips to Stay Competitive.” PCBB. https://www.pcbb.com/bid/2021-12-06-five-lending-tips-to-stay-competitive. Accessed 14 March 2023.
4 Furdyk, Brent. “Celebrities Who Went Bankrupt — and What They Did Wrong.” Slice. https://www.slice.ca/celebrities-who-went-bankrupt-and-what-they-did-wrong/. Accessed 14 March 2023.
5 O’Steen, Kathleen. “Basinger files Chapter 11.” Variety. https://variety.com/1993/film/news/basinger-files-chapter-11-107245/. Accessed 14 March 2023.
6 Yaged, Christine. “How Nicolas Cage Wildly Spent a $150 Million Fortune.” Finance Buzz. https://financebuzz.com/finance-nicolas-cage-buying-spree. Accessed 14 March 2023.
7 Miller, Carlin. “Nicolas Cage Says He’ll Pay $14 Million Debt to IRS; Finances in Ruin.” CBS News. https://www.cbsnews.com/news/nicolas-cage-says-hell-pay-14-million-debt-to-irs-finances-in-ruin/. Accessed 14 March 2023.
8 Martin, Emmie. “How Nicolas Cage blew $150 million on mansions, a private island — and a real dinosaur skull.” CNBC. https://www.cnbc.com/2017/05/10/craziest-things-nicholas-cage-bought-with-150-million.html. Accessed 14 March 2023.
9 “Johnny Depp sold his art for more than $3.6 million just a few hours after announcing it was available.” Marca. https://www.marca.com/en/lifestyle/celebrities/2022/07/28/62e2ed1aca47418e418b45ad.html. Accessed 14 March 2023.
10 Rodrick, Stephen. “The Trouble with Johnny Depp.” Rolling Stones. https://www.rollingstone.com/feature/the-trouble-with-johnny-depp-666010/. Accessed 14 March 2023.
11 “Johnny Depp Spent $3M to Blast Hunter S. Thompson’s Ashes Out of Cannon: Lawsuit.” NBC News. https://www.nbcnews.com/pop-culture/celebrity/johnny-depp-spent-3m-blast-hunter-s-thompsons-ashes-out-n715231. Accessed 14 March 2023.
12 Cassidy, Maurice. “How MC Hammer Blew Away $33 Million.” TheThings. https://www.thethings.com/how-mc-hammer-blew-away-33-million/. Accessed 14 March 2023.
The information above is not intended to and should not be construed as specific advice or recommendations for any individual. The opinions voiced are for general information only and are not intended to provide, and should not be relied on for tax, legal, or accounting advice. To discuss specific recommendations for any unique situation, please feel free to contact us.