I have gotten a few e-mails and posts asking me to talk about Michael Jackson’s passing. First, I sympathize with the Jackson family(s) with the lose of the their son/brother/father. It is never easy when a loved one gets taken from you.
Second, celebrities are a lot like you and me. Some of them make good business decisions with their money, others not so good decisions. The debt of the average person is similar to what I call celebrity debt in the sense that they keep living a lifestyle that they can’t afford.
In the case of Michael Jackson and the late Ed McMahon, they were spending more than they were making. We have all done that at one point or another in our lives unless we were drilled home in our heads about keeping things frugal, saving money and watching out for a rainy day.
In the case of Michael Jackson, he worked like a real trouper when he was a kid and when he grew up tried to recreate his childhood. I am not going to deal with allegations and abuse charges here since it is out of context with our topic which is pretty important as well, cash management.
As Michael Jackson continued to make millions, he continued to spend and live in the style of American royalty if such a thing can be called. He had his own version of the Pirates of the Carribbean ride on his Neverland Ranch, animals, an entourage that would travel with him and none of those things are cheap. Unfortunately, when the income streams start to dry up, you need to cut back or make more money. His financial advisors early on didn’t have the guts to tell him to watch his money and I suspect the few that did either left after awhile or may have been dismissed.
There is an old saying that remember that the higher you climb, the higher the risk of falling that you will hurt yourself. If Michael Jackson’s health was deteriorating over the years that added fuel to the cash burn that was going on in his life. At one point, Mr. Jackson purchased and owned the rights to the Beatle library of music. He has parted with a small portion of it to raise cash. I think Sony/ATV is his partner with this and I have no idea what is share is currently worth though I suspect it is hundreds of millions even with the current economic hard times.
Depending on the rumors and news releases that are out, at the time of his passing, Michael Jackson was in debt $400,000,000 or was completely cleared out because he had received advances on his upcoming performances. I just read another report and his debt is reported to be $500,000,000. That is five hundred million dollars. Considering his monthly rent for the palatial estate he was in was about $100,000 a month, that amount makes sense.
Did Michael have life insurance? That I don’t know and I don’t know how much of that is going to make a difference in the estate debt and how much would go to his heirs. In this case, his children would be the people I would think would get any money. Any other assets will probably be seized by creditors.
The take away from this is that you should not live the lifestyle of a king, a rapper, a superstar unless you are living within your means. There are plenty of kings, superstars and average people that live well within their means and are saving money. Some of them are millionaires. The secret is to not try to live like your neighbor (especially since a lot of our neighbors are losing their jobs, homes and pensions) and try to live like you should. Save your money, live your life but live it within your means.
A sad irony is that now that Michael Jackson is gone, his debt should go down because his spending is down and his estate consisting of his music will probably skyrocket with a demand for his songs (similar to what happened when Elvis and John Lennon died). Eventually his heirs should have a decent income stream if they ever get out of probate in one piece. Expect his estate to be in the courts for years to come. Back to celebrity spending..
The things that made or make celebrities go broke are the same things that make everybody go broke:
1. Ex-wifes or husbands who are getting alimony. In this category we can add child support as well because you have to take care of the kids until they are at the age of taking care of themselves.
2. Bad business decisions. Some of their business deals may not have turned out as well as they thought. Perhaps things like proposals for Michael Jackson Hot Chicken Wings didn’t turn out as well as he might have liked if he invested in something like that.
3. Theft from people who you trusted. There are lots of bad managers, agents, family members and friends who take advantage of people who are good natured who have money. Sometimes it is a great idea to have a thick skin and cut people off after you loan them that first thousand dollars that they don’t pay you back.
4. Bad, expensive habits. Michael Jackson loved to collect things (no jokes please). He reached a point when he had money that when he wanted something, anything, he would buy it and then if he didn’t want it later on, would just return it. He use to do that with coin-operated video games back in the day when they were hot. We all have something that we do that costs us money. The difference between going broke and enjoying the hobby is knowing when to curtail spending on it.
What about celebs wanting loans because they are celebs?
When celebrities were extended credit at first, the lenders got some publicity. Banks got tired of that real fast just like they do with you and I when they weren’t getting the loans repaid. I have seen superstars get their lines of credit chopped like you and I if they are out of work and not repaying their debt.
This is a good place to also remind you if you have families to please check your life insurance policies, make sure your medical premiums are paid up and you have a will in place for somebody to carry out your wishes after you join our departed celebrity friends in whatever Afterlife lets you get in without a press pass or a five drink minimum.
Please have a safe, healthy, happy weekend.
Jun 26 2009
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Kim Isaac Greenblatt
Celebrity Debt, Your Debt and Michael Jackson