On Monday, July 13, 2015, Curtis James Jackson III, also known as the rapper 50 Cent, filed for bankruptcy. How does someone whose net worth was reported at $155 million a few months prior suddenly claim to have assets and debts between $10 and $50 million?
Part of the issue is related to rapid, large, but short-lived income. For those individuals who quickly make huge sums of money in a short time (think pro athletes, lottery winners), it is easy to forget that the level of income will not go on forever. These people might spend too extravagantly, buying big houses and shiny, fast cars, not understanding the cash flow needs (I.e.- maintenance) of these assets when the money stops flowing in. In the case of 50 Cent, his bankruptcy documents stated his “debts are primarily consumer debts.” One of his other business ventures also recently filed for bankruptcy as well.
No matter how much money you have, it is important to have a good group of advisors. This group should include CPAs, lawyers, insurance agents, and investment managers. Good advisors should help you make important financial decisions. They can help you evaluate if you can tolerate the risk of investing in a sexy startup company or need to put more money into retirement accounts, and hopefully keep you from going bankrupt like 50 Cent.
While few of us have the ability to make massive wealth and lose it quickly like a rap artist, most of us are capable of living beyond our means, overspending, and finding ourselves in trouble. We take budgeting very seriously, as part of our working with business owners to grow their wealth, instead of losing it all like our friend 50 Cent.
Need a recommendation for an advisor? Contact me and I’d be happy to recommend a colleague. And if you do need to file for bankruptcy, I can help you find a good bankruptcy attorney, but I’d rather help you figure out a budget.