Keeping up with the illusory Joneses
Famous rap star 50 Cent just filed for personal bankruptcy. Right up until the court proceeding, 50 Cent was sending his 8 million Twitter followers images of his flashy lifestyle. His selfies frequently included exotic cars, piles of cash everywhere, and expensive jewelry. In court, he admitted that his lifestyle was a fraud: the cars, jewelry, and luxury items were borrowed. He filed for Chapter 11 bankruptcy to restructure the $50 million that he cannot repay. What prompted the bankruptcy was a new judgment he lost a couple days ago for $5 million; for a privacy violation by posting a sex-tape online without permission from the woman. This judgement was in addition to another $17 million case that he lost to a headphone company.
Just a couple years ago, 50 Cent was reported to be worth well over $100 million from a water deal. But if your spending far outstrips your income and assets, no matter how much money you start with, you’ll be headed to bankruptcy court as well.
50 Cent may not have much financial literacy (he admits that he has no idea what the value of his branding deals may be), but his paid and licensed accountant should be well versed with his finances. Apparently, this was not the case. 50 Cent’s accountant had never met him, left material assets and liabilities off of his balance sheet, and did not know key elements of his lifestyle spending. Another important financial lesson is: if you do not have expertise to perform a task, you must still know enough to manage these financial experts working on your behalf.
Yes, it is possible that this bankruptcy is just a ploy to get out of $22 million in judgments, however, it seems unlikely because he’d be committing perjury and damaging his reputation for what would be a small amount to his reported $155 million net worth just a year or two ago.
The financial literacy lesson that too many sports stars and celebrities learn too late, is that your spending must always be at a sustainable level to your income, no matter how high or variable that income may be.