Following the sudden passing of pop superstar Michael Jackson, many people around the world are reminiscing about his music and mystique. However, as a financial advisor, I can't help but focus my attention on Michael Jackson's finances.
As the stories about his financial situation come to light, it appears that Jackson had serious money problems. Despite a lifetime of achievement, Jackson's final curtain call revealed foreclosures, failed ventures and financial chaos. At the end of the day, the 'king of pop' was just another person who suffered the consequences of ignoring the principles of money success.
After coaching hundreds of clients, I have discovered that whether you earn millions of dollars or minimum wages, once you break the rules that govern money, you're going to pay a heavy price. Here are some of the lessons that have been highlighted in the Michael Jackson saga:
No Matter How Much You Make, You Can't Spend More Than You Earn
If I earned a hundred dollars every time I heard someone sincerely say, "If I got a million dollars today, I'd never be broke again," I would be well on the way to creating a similar fortune for myself. The reality is that many people show an amazing propensity to increase their spending in excess of their income.
Unfortunately, Jackson was no different. Although his musical genius made him millions - his 1982 hit album Thriller is still the world's best-selling album of all time - Jackson lived an excessive lifestyle that usurped his earning power. In a 2003 court case, it was revealed that Jackson was spending US$20 million to US$30 million more each year than he earned. (Take comfort if you're only $10,000 over budget every month!)
Living within your means is a simple principle that is perfectly expressed by this ditty, "If your outgo is greater than your income, then your upkeep will be your downfall."
You Can't Borrow Your Way Out Of Financial Difficulties
Financing a budget shortfall by borrowing is a perfect blueprint for financial disaster. The only way to cure this common consumption problem is to trim unnecessary spending and/or earn more to pay your bills. Borrowing to make ends meet will only increase your monthly obligations and your money distress.
Lavish lifestyles, pricey properties and costly court cases all reportedly contributed to Jackson's money problems. In an attempt to rebalance his financial position, Jackson used his assets to secure loans totalling US$200 million from the Bank of America.
Repaying this loan probably created more cash flow problems, as Jackson also had to turn to wealthy friends to bail him out.
Two money principles that can help you to manage debt are: never borrow to finance your lifestyle, and if you're in debt, you can't borrow your way out of it.
Don't Leave Your Family In Confusion When You Die
As reports continue to roll in about the circumstances surrounding Jackson's death, it appears that there is uncertainty about his final wishes. The Jackson family lawyer has commented that there were stories about the existence of a will, "but none has been presented to the family at this time".
Amid speculations that it could be a lengthy and complex process to settle Jackson's estate, there is hope that he had the foresight to set up a trust that would help to cushion his beneficiaries from having to pay out millions in probate fees.
It's never too early for you to institute this important financial rule: make proper provisions while you are alive to take care of your family and assets when you die.
Passive Income Keeps Paying Even When You Stop Working
The Jackson drama isn't all bad news. Thanks to his incredible talent and prolific production of great music, Jackson's income will only increase after his death. Already, the entertainer's untimely demise has led to record-breaking sales of his albums and music videos. Jackson "may be worth more dead than alive," opined Jerry Reisman, general counsel for the recording studio in which Thriller was produced.
Although most of us will never attain Jackson's earning ability, this scenario is a perfect example of the power of passive income. If you really want to be wealthy, you have to create opportunities to earn money even when you are not physically working. Some options include: royalties from music or book sales, Internet sales, network marketing, and franchising a business idea.
You Really Can't Have It All
Although he had fortune and fame at his fingertips, Jackson was reportedly a lonely, isolated man. Some people believe that getting more money will solve all their problems; we can see that didn't work for Jackson. Despite all his wealth, he never seemed to achieve true happiness.
Remember these principles: there is more to financial success than just the accumulation of wealth; your money should help to enrich your life and that of others; and when your time on earth comes to an end, you can't carry it with you.
Copyright © 2009 Cherryl Hanson Simpson.
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