Legendary singer Dionne Warwick has filed for bankruptcy. In a statement last week, her publicist said the singer’s filing was “due to several consecutive years of negligent and gross financial mismanagement.”
Dionne Warwick’s success began in 1962 with “Don’t Make Me Over,” followed by 18 consecutive Top 100 singles. Her repertoire includes “say a little prayer,” I know I’ll never love this way again” and numerous others. Since she did not write her most famous songs she has not benefitted from the significant royalties that songwriters Burt Bacharach and Hal David did.
Even though the singer has worked for over fifty years and sold over 100 million albums and 30 million singles, it is alarming to read that she, at 72 years old, must continue to work hard and give live performances to keep earning to supplement her income from social security and a pension. Dionne Warwick will always be a legend; she is a truly gifted singer, and she leaves a legacy of some of the world’s greatest music.
This is yet another sorry tale that graphically illustrates the far too common “riches to rags” saga. There are some common threads that run through the reasons why so many high earning celebrities such as musicians, actors, and sportsmen go broke,
Artistes and sportsmen are particularly vulnerable when it comes to their personal finances as they face unique challenges. When the funds start coming in, many don’t realise that they may be earning a lifetime of income within a relatively short time frame. Careers are often brief and uncertain particularly for sports men and women whose careers can come to an end in their 30s or sooner, and one serious injury could cut short a career overnight. Musicians cannot predict the popularity of their music, and an actress doesn’t know which will be her last role. Unrealistic assumptions about future earnings can cloud judgment when it comes to savings and spending.
Don’t neglect your education. It is very easy when the money starts rolling in to view education as a waste of precious time. This is a huge mistake, as the benefits of education will remain long after a career has ended. Many celebrities shortchange themselves by dropping out of school to pursue their celebrity and many more fail to return to complete their education. By getting a qualification, there is a better chance of being able to earn even when celebrity is waning.
Excessive spending is a reason for celebrities suffering financial misfortune. Regardless of whether you make N500, 000 or N50m a year there is the very real possibility of going broke. One Hollywood star is reported to have had 22 cars, four yachts and 15 expensive homes all over the world some of which he never visited.
Along with their large incomes, celebrities, and some Nigerian stars are no different, maintain enormous overheads that include large homes, managers, agents, stylists, publicists, bodyguards, assistants and hangers-on; they are besieged by family members and friends who regularly require assistance. Some are naïve and as they become very popular they fall victim to those who are willing to pander to their celebrity for financial gain. Members of their entourage constantly surround and insulate them from reality feeding their egos. “Untidy” personal lives are also a common feature with multiple relationships resulting in multiple children and the attendant costs of education and upkeep.
A lack of financial knowledge often makes celebrities vulnerable to business owners, financial advisors, bankers and stockbrokers some of whom may take advantage of them and who are eager to help them “invest” their fortunes. Most have never learned the basics of financial management and end up making poor investments and end up losing millions. One must bear some responsibility for not being more vigilant with one’s finances. It doesn’t matter how much money you make; if it is mismanaged or spent frivolously, it will be gone very quickly.
George Foreman appears to stand out from many sportsmen; he turned professional at 20 and displayed much financial acumen relatively early. He put aside about 25 per cent of what he earned at every fight into a pension plan. In spite of his commitment to investing he did expose most of his assets to significant risk in poor investments losing a fortune.
In later years he was to become wealthier than he ever was during his boxing career. In 1999, he sold his name and image to the manufacturer of George Foreman’s Lean Mean Fat-Reducing Grilling Machine for $137.5 million in cash and stock.
When celebrities are in their earning prime, spending rises to meet income levels. When income falls, it becomes difficult to curb expenses quickly enough either because they cannot break the spending cycle, or because they have already committed to large purchases and cannot meet debt payments. It doesn’t take long for one to be broke if income stops and spending continues. Sometimes one may be in denial and may be unwilling to accept the fact that the lifestyle must change. By limiting expensive fixed costs and overheads, one can adjust a lifestyle for the realities of inconsistent income.
One watches with rapt attention, the exciting growth of Nigeria’s entertainment industry, an increasing crop of outstanding musicians, actors and actresses, comedians, producers and directors, sports men and women. A word of caution is important however. Artistes and sportsmen must plan for what could be an uncertain future by diversifying earning streams, investing and protecting the large sums of money earned today. Do not be complacent. Whether you are a celebrity or a successful business owner, learn from past examples and protect your future to avoid the well-trodden road from riches to rags.
by ’Nimi Akinkugbe culled from Punch