Takeaway Lessons from Celebrities Who Went from Rich to Broke

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When I heard about the death of the famous singer, Whitney Houston, I was saddened by the news. She was one of my favorite artists way back in 'The Bodyguard' days because of her exceptional talent and grace. I witnessed her rise to stardom and fortune to being broke. And as I pondered upon her dramatic life of  fame, broken marriage, drug addiction and financial crisis, I realized that  making lots of money or a celebrity status is not a key to financial security. And Whitney Houston is not alone...

Other celebrities who were reported to have filed for bankruptcy are as follows:

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• M.C. Hammer - Remember the 90s hit “U Can’t Touch This!,”?  the hiphop star was a huge money earner but was forced to file for bankruptcy in 1996 with $13 million in debt. M.C. Hammer earned more than $30 million in one year , but after purchasing a $12 million mansion in Fremont, California with 200 paid staff, and 40-plus entourage, he soon found himself unable to support his lavish lifestyle 

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• Mike Tyson - Once the most feared world boxer who earned more than $400 million during his boxing career. But Mike Tyson's extravagant lifestyle  - filled with mansions, wild animals, and a large entourage combined with an expensive divorce led to his bankruptcy in 2003, with debts reaching $27 million.

By studying the life of these stars, we can see common patterns that led to their bankruptcy:

• Lack of Financial Education - Often, when you go from having nothing to having substantial amount of money, a financial education is not part of the package.This also holds true for lottery winners who have lost their money after winning millions of dollars/pesos. Many celebs think that they won't lose what they have since they are earning a lot. Their attention is focused more on buying the biggest house or luxury car than learning how to handle their finances.
• Lavish Lifestyle - Celebrities, like the rest of us, can get caught up in having the finer things in life. The more you earn, the more you think that you have every right to justify expensive purchases. 

Since many celebrities don't have long-term financial goals, when the money stops coming in, they become vulnerable to financial struggles. These famous stars are living testimonies of the common misconception that you have to earn more to save more.

With this, it is important to note that the reason most people fail financially is not because their incomes are too small, but because their spending habits are too big.  As we simply say, spending beyond one's means.  This may sound very basic, but it's true.

Controlling your spending is just half part of the solution, the other half is learning and committing to saving and investing a portion of your income no matter how small or big your paycheck is.