Quite often we see an erstwhile celebrity hitting the headlines for all the wrong reasons. The astronomical rise and fall of Tennis legend Boris Becker is the most recent one to catch our attention. Bollywood stars who fall from their pinnacle of popularity into deep pools of debt and financial distress is again a common media story. When you study these cases closely, you can detect a similar pattern – the blunders they made in their financial planning.
In the life of an ordinary professional, their earning years are spread over a period of 3 to 4 decades. So there is a sense of stability in their income levels even as their family or business needs grow. However, when it comes to celebrities, their career span is much shorter. But in that short duration, they make a crazy amount of money!
Long term financial planning is important for ordinary citizens too, but it is much easier for us to estimate and set goals. For celebrities, financial planning becomes a challenge as it is difficult for them to predict how long their high profile careers will last. However, there are some common pitfalls that must be avoided, in order to build a secure future. Though these learnings are derived from the mistakes of celebrities, many of these precautions apply to us normal people too.
#1 Don’t assume your professional income will keep growing indefinitely – High risk but high visibility careers have a tendency to be uncertain, whether it is a career in sports, cinema, television, fashion or politics. They do not have a steady job graph and are subject to major ups and downs. So whenever you are in such a job, pay attention to what you earn today. Learn to live within your present income levels. Don’t increase your lifestyle and needs assuming you will make more money tomorrow. This is the biggest reason for people to get into debt traps.
Invest whatever surplus money you have made till now judiciously. Divide your investments across a collection of low risk and high risk instruments. Choose from a variety of options such as property, equity markets, fixed deposits or chit funds.
#2 Avoid being on the wrong side of the law – When your income levels are very high, the resulting tax liabilities are also high. It is very tempting to evade paying tax by choosing spurious investment options hoping to maximise your earnings. But this is a foolish and self-defeating move. You will end up living constantly in the threat of getting caught by the authorities. And by choosing these unsafe instruments, you are putting your principal itself at risk.
Pay your taxes diligently. Stick to the safe and government approved investment options. Choose your stocks carefully. Register your property to its entire value. Pick only registered chit fund companies, don’t fall for spurious Ponzi schemes. For instance, Shanthala Chits is a reputed chit fund company based out of Bangalore. We have a successful track record of 23 years, with thousands of satisfied customers. Our regular customers include businessmen, homemakers, IT professionals and senior citizens. Your money is safe with us as we are a registered company under the Chit Fund Act of 1982, Government of Karnataka.
#3 Be financially literate – don’t allow others to handle your finances
Quite often, celebrities lack the financial knowledge. So their grip on financial matters is weak. This makes them highly dependent on family or staff members to take care of their financial affairs. In several cases, major rifts arise due to this excessive dependence on others. They tend to become exploitative and dishonest.
Whatever be your education background, take time off to learn basic financial principles. Basic knowledge on income tax provisions, property sale, equity markets, interest and dividend earnings is a must. This will make you vigilent and cautious when dealing with your team.
Who doesn’t like the glamour and fame associated with the life of a celebrity. But without careful financial planning, the decline will be steep and painful. Its ok to enjoy fame and power while lasts, but it is critically important to invest in a financially secure future, for a peaceful life after the celebrity years.