Money management can be a vexing and daunting prospect for many, especially in a down economy whose recovery is all but certain. This may explain a perverse fascination with reports about celebrities who, through bad habits, bad investments or bad attitudes, or even through no fault of their own, squander their considerable fortunes. Dan Berman, posting on AdvisorOne.com, recently rounded up the ten worst financial meltdowns by athletes. It’s a Hall of Fame roster of an investing Hall of Shame.
Legendary quarterback Johnny Unitas, for example, lost $4 million and John Elway $15 million. But the champ is Mike Tyson, who suffered a $400 million knockout, primarily through reckless spending ($173,000 for a gold and diamond necklace?).
Athletes, of course, aren’t the only ones to drop the money management ball. Musicians, too, have seen their debt go off the charts. Perhaps the most infamous case is MC Hammer, who at the peak of his chart-topping success in the early 90s, bought, among many other things, a $30 million home and spent a half million dollars a month on a full-time staff, according to CNBC. By 1996, he was nearly $14 million in debt and filed for bankruptcy.
The New York Post reported this week about the sad case of Rock and Roll Hall of Famer Sly Stone, the legendary frontman for the pioneering rock and funk band Sly and the Family Stone, who is now homeless and living in a van in Los Angeles.
Actors, too, can find themselves in trouble when they don’t stick to a money management script. Nicholas Cage, a collector of among other things, vintage comic books and ancient castles, was forced to sell them all after being hit hard by the 2008 economic collapse.
Especially confounding to everyday investors must be the plights of lottery winners who blow through their winnings. Here are people just like themselves who defied the odds and hit the jackpot, but threw away their good fortune. A St. Louis wig shop owner’s situation sounds particularly hairy. She won $18 million in 1993, and in addition to the purchase of a million dollar house and such, she donated more than $1 million to Washington University and more than $277,000 to Democratic candidates. Reportedly, a gambling habit did not help matters and she filed for bankruptcy in 2001.
During the Depression, screwball comedies such as Bringing Up Baby and My Man Godfrey were wildly popular with audiences, who found escape from their economic woes by laughing at rich people acting foolish. The modern-day equivalent may be the “Real Housewives” franchise and other reality shows that depict wealthy people in an unflattering light.
Reality TV buffs insist they watch these programs because it makes them feel that despite their troubles, their own lives in comparison seem not as messed up. This may be why stories about financially fallen stars are of such interest. Tight as things may be paycheck to paycheck, at least we aren’t saddled with the mortgage on a Bavarian castle.