How an Electrician's Lessons Could Have Saved Hollywood Stars Millions
My dad might not have made a lot of money, but he knew a lot about saving.
Celebrities are too often in the news for their financial perils. Despite making millions, poor fiscal management and oversight gets the best of them. In the past few weeks, headlines have included Alyssa Milano suing her business manager for $10 million after she accused him of sending her into financial ruin and Johnny Depp having to sell-off prized possessions after alleging that his managers caused him to lose of $40 million.
These celebrities could have avoided these issues if they would have just listened to an electrician. That's right -- the best financial advice I learned came from my very fiscally responsible father, Bernie, who didn't graduate from college and spent his life as a tradesman but knew exactly what to do with a buck.
Here are his lessons so you can implement them into your lifestyle and make sure that you stay clear of financial misfortune.
It's not what you make, it's what you save.
This was one of my dad's favorite sayings and he said it often, often accompanied by "keep your nut low," which meant that your overhead -- like your mortgage, cars, food and other staples -- can limit the amount of your financial flexibility, so keep that in check.
My dad lived this mantra, living with his mother until he got married at age 36 (and this was back in the late 50s to early 70s), so he could save every penny to have enough to start his life with fewer struggles once he got married.
He would impress upon me and my sister not only to not extend beyond our means, but to live significantly below them because, as he noted, if you make a lot of money and spend it all, you still end up broke.
This is an important lesson for celebrities like Alyssa and Johnny, who make a lot but spend too lavishly. It's an important lesson for you, as well, to make sure you're putting a meaningful part of each paycheck away so you aren't living from one payday to the next.
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You can delegate financial tasks, but you can't abdicate your financial responsibility.
Managing financial affairs is not everyone's strong suit (or at least not what many people consider fun). The more money you make, the more complicated it can be. So, while it makes sense to get help with the execution and the expertise of managing financial affairs, you need to remain responsible for the oversight.
My dad was a stickler for this. He carved out time each Sunday to ballpark where his finances should be. Any major discrepancies were immediately investigated. If none were present, then he would wait to do a full accounting on the last Sunday of each month.
Giving other people authority to help you with your finances can lead to them issuing payments you know nothing about, getting you into bad investments and the like. Don't allow any checks without your signature or electronic payments without your authorization. Carve out an hour or two at least once a month to tie up all of the monies coming in to make sure that they are there and all of the monies leaving your account to make sure that you know what they are for, are authorized and on plan. Once a year, come up with a projection for revenue and expenses, too. If you are off, understand why so you can make any necessary adjustments.
And, adding my own rule, if you don't understand something, don't invest in it until you do and think it's a good idea. You need to take full responsibility for your financial well-being.
Have a long-term financial view.
This was a big one for my father, who knew that staying in his job for 40 years would yield a certain pension. He understood what was needed in retirement and made sure that long-term view was present. He taught my sister and me to do the same.
Celebrities don't often have this view, and much like freelancers, they often have a lumpy salary. So, while you may have a big movie that pays off today, you may not get another of that scope. Or, if you are an athlete, you may make a big salary for three years, but you have another 40 years to think about before you should be retiring. Living and planning with that long-term view will put spending and saving into priority.
The same goes with freelancers or others who maybe cash in on some stock options from a start-up. If your salary isn't regular -- and frankly even if it is currently, because you never know what will happen -- make provisions to get you through the rough patches and make sure you have enough saved up to be able to live comfortably during retirement, too.
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