It’s hard to imagine celebrities getting broke. They earn so much more than regular people. And as soon as they make a name, every attachment they have to products have a price tag. Celebrities not only earn from being artists, they also get paid from using products in public: they get paid when photographed wearing branded clothes or when they make an appearance on a certain event. It’s almost as if they make money just by living.
Still, many celebrities go broke.
One major reason why celebrities go broke is the “unrealistic assumptions of future earnings.” An actor earns $10,000,000 for one movie now, $15,000,000 in the next project, and then expects the third one to be even bigger.
Success doesn’t last forever. “When many celebrities are achieving their peak earnings, they fail to recognize it. They assume that the best is yet to come. These unrealistic assumptions about future earnings cloud their judgment when it comes to savings and spending.”
Here are seven celebrities who failed to hold on to their millions.
In the 1990s, Toni Braxton was one of the hottest R&B singers in the world with classic hits like “Breathe Again,” “Another Sad Love Song” and “Un-Break My Heart.” By 1996, Braxton already sold more than 20 million albums. However, two years later, she was forced to file for bankruptcy. The news created a public uproar considering that Braxton was at the peak of her career. She eventually explained that royalties from her songs were minimal. But it was also reported that Braxton had a bit of a shopaholic streak. So both reports could be true and her minimal royalties could not shoulder her shopping habit.
“I love dishes and house things, so I kind of lost it a little bit on the houseware,” Braxton told investigative magazine show “20/20” in 2012 about her shopping sprees. “That’s what I indulged in. I loved that part of it.” The problem in this scenario is that aside from getting low royalties as she claimed, she was also perpetually in debt from her recording company. This happened because while she recorded her first album, she also got an advance payment for the second album before it was even made. So Braxton was basically already eating the chicken before they were hatched—going by that “don’t count your chickens before they hatch” saying.
After her first bankruptcy filing—yes, there was a second one—Braxton’s star somehow faded. But she made a successful comeback via a couple of other albums and then branching out to doing reality shows like “Dancing with the Stars” and “Braxton Family Values.” Still, it seemed like Braxton has the inability to manage her finances. In 2012, she filed for bankruptcy again. Hopefully, she had finally learnt her lesson this time. She said in the same “20/20” interview that she has been monitoring her expenses because she was on a tight budget.
Over the course of her career, Braxton won numerous awards including Grammys. She has sold over 67 million records and 41 million albums.
Rapper 50 Cent is fond of posting photos of himself with his many cars, wads of cash and half-naked girls. So imagine the public’s surprise when in 2015, the rapper, whose real name is Curtis James Jackson III, filed for bankruptcy. 50 Cent’s downfall was a mixture of bad business and bad luck—or maybe bad decision. American Express also noted that one of the reasons a handful of celebrities go broke after earning millions is the assumption that their success as artists would translate to success in other ventures. 50 Cent is also a businessman. He has since made so many investments that in 2007, he became the second richest rapper behind Jay-Z. Aside from making music, 50 Cent also acts, is a licensed boxing promoter, a mining and precious metals industries investor and a chief executive officer of various companies.
Not all of his investments were a hit. And in explaining why his lifestyle doesn’t match his stance of being bankrupt, 50 Cent said his online persona of being filthy rich was just a social media marketing ploy. The bundles of dollars and the luxury vehicles were just props—the former were fake while the latter were rentals. None of them were his for real. The Guardian quoted his lawyers as saying: “The cash depicted in social media postings is not real. The postings, which among other things, make use of stage or prop money, are part of the debtor’s routine social media marketing activities and relate directly to the debtor’s various business interests. Prop money is routinely used in the entertainment industry, including in movies, television shows and social media postings.”
50 Cent’s business mistakes were complemented with an ill decision to release a sex video of Lastonia Leviston, the baby-mama of rapper Rick Ross, whom 50 Cent had a long-standing beef with. Leviston filed a multimillion-dollar lawsuit against 50 Cent for the unauthorized release of the sex tape and won. The rapper eventually paid off all his debts and was eventually discharged from bankruptcy. He is currently back to being a multi-millionaire and is still engaged in numerous business deals.
She was a successful model in the 1980s and transitioned as an actress gaining success as a Bond Girl in the 1983 film “Never Say Never Again.” She proved that she was more than just a pretty face by getting a Golden Globe nomination for her role in “The Natural.” But a decision to pull out of the 1993 film, “Boxing Helena,” got Alec Baldwin’s ex-wife into financial trouble. The studio behind the film sued Basinger for $8.1 million, which was a lot more than her then net worth of $5.4 million. Basinger was forced to file for bankruptcy.
The actress decided to take a break from acting after her legal troubles. But a role in “L.A. Confidential” changed the course of her life. She won an Oscar for her role and improved her financial standing.
Can you imagine one of the most popular actors in the world being broke? Well, Johnny Depp was on the brink of being broke just last year. He never actually filed for bankruptcy but Rolling Stones reported that his $650 million earnings from films were almost gone. His films in his decades-long career made around $3.6 billion.
According to Depp, he had the wrong people managing his finances. According to his people, Depp was spending money like they grow on trees. Maybe both sides were right. On the one side, he said: “You would think that with all of the money passing through the hands of celebrities there would be such a sheer number of honest, talented financial advisers serving them that these types of disasters couldn’t happen.”
“Unfortunately, that isn’t the case. Celebrities attract many of the wrong people who only see them as marks, and not valued as clients.” Depp said that was exactly what happened to him. Depp sued his management, The Management Group (TMG), led by his business manager Joel Mandel and his brother Robert. The suit was for negligence, breach of fiduciary duty and fraud. The bankable actor said TMG claimed over tens of millions as commission from his earnings. The team also allegedly paid entities without Depp’s knowledge including over $5.6 million in fees to the Internal Revenue Service (IRS) in penalties for late filing of tax returns. Apparently, Depp didn’t know that he had been late in settling his tax dues for 13 years.
“If there were things for me to sign that would come in—and there would be occasionally—I would sign them…” said Depp, “I don’t want to see what they are because I trust these people.” But Depp after being on the brink of bankruptcy, finally learned his lesson. “Now I look right at everything I sign.”
The Mandels denied Depp’s charges and claimed that Depp made wrong investments and often spent more money than was necessary. They claimed the actor had a “disorder” that compels him to spend at least $2 million a month. The Mandels also said, “Wine is not an investment if you drink it as soon as you buy it.” TMG put up foreclosure notices on Depp’s houses in Los Angeles.
“In 30 years of business, no current or former client of TMG has raised any issue, other than Johnny Depp, who continues to spread malicious, unfounded lies about the company. TMG will vigorously defend and defeat all of Depp’s fabricated claims,” TMG lawyers told Rolling Stone magazine.
Depp’s star may be starting to fade but there is no doubt that the three-time Oscar-nominated actor still has a lot of glimmer left in his arsenal.
Sleazy businessman Joe Francis’ numerous legal troubles greatly contributed to his financial troubles. Francis became a millionaire by urging drunk university girls to take their tops off for the camera. This gave birth to the film series “Girls Gone Wild.” Call the show sleazy but it was a hit and earned Francis millions of dollars. But the film series would also be Francis’ demise as some of the women filmed for the show sued him. One plaintiff claimed that she didn’t know she was being filmed. She lost the case after Francis and his team was able to show a video of the woman giving her consent. But there was no defense for filming minors for the show. Francis pleaded no contest to the cases of child abuse and prostitution filed against him.
Francis was also heavily involved in gambling and was also sued for slander over a gambling-related incident. There were some other legal troubles. Eventually, in 2013, the Girls Gone Wild Brands filed for bankruptcy. Francis has been quiet ever since.
Ignorance can also lead to a celebrity to declare bankruptcy. This happened to pop singer Aaron Carter. He came into the pop music scene barely 10 years old with his song “Crush On You.” Perhaps because of his youth, he was probably not aware that he should be paying taxes with his earnings. This is ironic considering that he is the younger brother of Backstreet Boys’ Nick Carter. Surely big brother Nick and their parents could have told Aaron and his management team to pay the IRS. Just six years after he made a name for himself, Aaron was forced to file for bankruptcy after having owed the IRS close to $2 million. Aaron really should not be blamed as he was a minor when the incident happened.
Aaron continues to do music and even tour, but he is no longer as hot as he once was—career-wise.
The IRS was also Will Smith’s temporary downfall at the start of his career in the late 1980s. With the release of his first album “He’s the DJ, I’m the Rapper,” a collaboration with DJ Jazzy Jeff, Smith immediately became a millionaire. Surprised by his sudden wealth, Smith immediately spent his millions only to be billed by the IRS some $2.8 million in tax due. His tax debt was more than what he had, so almost everything he owned was turned over to the government. Good thing Smith’s talent is not limited to making music, he can act too, which led to a role in “The Fresh Prince of Bel-Air.” Smith never looked back from there. Now, Smith is one of the biggest and most expensive actors in the world and people don’t even remember a time when he was almost broke.
When you really think about it, celebrities have a bigger chance of becoming broke because more often, they are handed a large amount of money when they almost had none just days before. The surprise of having so much can turn a person into a one-day millionaire without thinking of the consequence the next day. When you haven’t eaten for a week and were suddenly invited to a buffet, you are prone to eat more than your tummy can take. As a result, you are going to be sick.
MC Hammer, Nicholas Cage, Mike Tyson—they all have experienced insane levels of success in their respective fields of music, films and sports. But they were not immune to financial troubles. The key should always be temperance. If celebrities, who have more means of earning money could fall into bankruptcy, then the average Joe is even more vulnerable to the financial crisis. That’s why you have to be more prudent about how you spend your money: think before you open your wallet.