How To Avoid Celebrities Debt Follies?

The key to financial freedom is not to earn lots of money, else money machines like celebrities will never face bankruptcy. It is about controlling expenses!

In the latest example of celebrity excess, singer Toni Braxton has filed for bankruptcy and owes between $10 to $50 million. Her list of debtors includes AT&T, the Four Seasons, and Tiffany.

So why do celebrities fall on hard times financially? This is because of their unpredictable income expensive lifestyles, and enormous pressure from family and friends who want their money. We can avoid their spendthrift ways.

1. Control spending.

Celebrities love to spend money especially during their new-found financial success. They think their high earnings will continue, but in reality their careers are short. They actually need to spend modestly to make their money last.

2. Make a plan.

Make a plan and follow through when it comes to finances. You have to be prepared for the worst-case scenario, such as disability or sudden loss of income.

Plan a rough estimate of your career, income and lifespan. Next, live off that amount and the rest should be saved.

3. Learn to manage an unpredictable income.

While it's OK to splurge a little when a big chunk of income comes in, it's important to remember that you still have to pay 40% of it on income taxes.

And because income might go down in the future, setting money aside for rainy days is essential. This advice applies to anyone who sees their income dip and dive, including people who work in sales, freelance, or consulting fields.

4. Pay off debt as soon as you can.

Celebrities should avoid mortgages and buy homes that they can afford to pay for with cash, since they often don't know when their next paycheck is coming.

5. Surround yourself with people you trust.

Celebrities and noncelebrities alike need to make sure they trust the people who work for them, including personal finance advisers.

The worst thing is to leave your finances and bank accounts in the hands of a rogue adviser who charges exorbitant fees or misappropriate your money. You should read your own monthly statements and regularly check up on savings and retirement accounts.

6. Save for retirement.

During good times, people should put at least 8% of their income toward retirement accounts. That's in addition to maintaining an emergency fund of six to nine months' worth of expenses.

7. Just say no.

Don't ask for money from friends or distant relatives. Having a financial adviser can help to monitor your spending habits.

If you have lots of money but became a bankrupt, don't worry as following the tips above will help you to come back into solvency.