We look up to celebrities for all sorts of things, from fashion advice to tips on which charities to support. But one thing we probably shouldn’t look up to celebrities for is financial advice. While there are some celebrities who have their financial houses in order, the truth is that many of the “rich and famous” are definitely more famous than rich, despite bringing in several times what the average American family earns each year. But while we might not want to emulate them, we can definitely learn from them. Here are four celebrity money mistakes we can all learn from.
Find out now: How much house can I afford?
1. Keep Your Documents Up-to-Date
When actor Heath Ledger passed away, it was discovered that he hadn’t updated his will since 2003. It didn’t include his daughter or his girlfriend, leading to some drama within Ledger’s family.
The lesson here is that it’s important to update your documents (like your will, power of attorney and beneficiary designations) after a significant life change like a marriage, divorce or birth of a child. We all get busy, but these documents need to be changed since they affect the lives of our loved ones.
2. Don’t Spend More Than You Make
Countless celebrities have been caught up in bankruptcy proceedings after spending more money than they actually made. Even though they had a lot of money coming in, their income couldn’t support their lavish lifestyles over time, particularly once their careers began to wind down.
We all know that we can’t spend more than we make indefinitely. The lesson here is to make a budget and track your spending carefully so you can find and fix your spending leaks before it’s too late.
Check out our budget calculator.
3. Pay Your Taxes
Over the years we’ve seen a number of celebrities caught up in battles with the IRS. Many don’t pay their taxes when they find themselves in financial trouble, but all this leads to is more trouble down the road. These celebrities often face jail time and a big fine in addition to having to pay at least a portion of the back taxes they owe.
Filing taxes is not fun (especially if you owe money) but they are necessary and need to be done timely every year to avoid facing consequences.
Related Article: 15 Celebrities Who Died Poor
4. Don’t Buy More House Than You Can Afford
Celebrities are famous for buying multimillion-dollar mansions. While these homes are definitely beautiful, buying them is not always the best financial decision. In fact, within the past few years, several stars have gone through foreclosure after not being able to afford the monstrous payments their expensive homes required. Many of them also lost money when the housing bubble burst not too long ago.
When you get ready to buy a house, it’s important to ensure you can afford it so you have plenty of room in your monthly budget to pay the rest of your bills.
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