Though we may sometimes envy the lifestyles of the rich and famous, their exuberant wealth doesn't always translate into being better money managers. In fact, the financial mistakes celebrities make aren't just isolated to them; the average person may be making the same bad money moves as well.
Bravo celebrity Buffie Purselle — who's had a successful career as a tax accountant and business manager to professional athletes, entertainers, reality TV stars and entrepreneurs — spoke to Select about the overlap between the money mistakes she sees celebrities making and the common financial flaws the everyday person is capable of.
"I witnessed a single commonality time and time again," Purselle says. "That commonality is a bad relationship with money. If you have a bad relationship with money before you start making a lot of money, those same bad habits will carry over."
Below, Select takes a closer look at the top three financial mistakes Purselle sees celebrities making and what the everyday person can learn from them.
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1. 'Balling' when they receive lump sums of money
You've likely come across the slang phrase "ball out" before as another way to say spending a lot of cash when you receive it. Purselle explains that she sees celebrities splurging on things for instant gratification instead of choosing a smarter way to use that money, like making their cash work for them in the market. For high earners, this move can lead to poor planning for expenses, such as a large tax bill they may have to pay.
"This happens to regular people also when they receive annual bonuses and change their tax withholding to maximize the amount of cash they receive," Purselle adds. "This creates a financial nightmare when tax season comes around."
Instead, whenever your income changes, write down a plan for how to maximize that additional cash before committing to anything. For example, an increase in salary or a bonus can help pay down high-interest debt or increase your savings.
Credit card debt, which often has the highest interest rate, can be paid off with a balance transfer credit card offering introductory 0% interest periods so you have more time to pay off your credit card balances while avoiding accruing any additional interest.
The U.S. Bank Visa® Platinum Card comes with 18 billing cycles of 0% interest on balance transfers and purchases (after, 18.74% - 29.74% variable APR; balances must be transferred within 60 days from account opening), plus no annual fee.
When you want to add to your savings, open a high-yield savings account that earns you more interest than a traditional savings account would. The Marcus by Goldman Sachs High Yield Online Savings offers no fees whatsoever and easy mobile access.
2. Not saying 'no'
Purselle has noticed that when you're a known celebrity and people can easily Google your net worth, you all of a sudden have far more family members and friends than you realized.
"Everyone in your orbit suddenly needs a loan or some sort of financial assistance," she says, explaining that many celebrities have attributed taking care of friends and family as the main reason for their financial demise. "MC Hammer famously reported having a staff of 200 with a monthly payroll of $500,000 for friends and family who really did nothing for the money," Purselle adds.
On perhaps a much smaller scale, this can happen to everyday people as well. You may find yourself in situations paying for family members' bills, for example. Although small amounts at first, they can add up quickly and put you in a bad financial situation.
"The lesson is just to say 'no,'" Purselle says. "You can empathize and support loved ones in more ways than becoming a human ATM."
3. Wearing their assets
Celebrities are often the ones many people look to for the latest fashion trends and this puts a lot of financial pressure on them.
Purselle says she's observed that celebrities often spend money on high-end brands that they only wear once or twice. When the calls stop coming in for gigs, it's only then that they really realize their biggest assets are their clothes, shoes and jewelry.
"Erika Girardi [now Erika Jayne] of 'The Real Housewives of Beverly Hills' recently found herself in this predicament and had to sell her clothing for a fraction of what she purchased it to survive," Purselle says.
Buying clothing or accessories that are over budget is something everyday people do as well. Purselle points out that a designer bag or pair of shoes can easily equal one or two paychecks, and this is often bought just to make others think they have more money than they actually do.
"The lesson is to stop trying to keep up with the Instagram-rich Joneses," Purselle says. "They don't have any money either."
A good way to avoid temptation in the first place is to get off social media, where users are bombarded with marketing as well as images of people flaunting their newest purchases. Spending more on consumer products won't make you happier in the long run. Instead, focus on social connections, experiences and giving back when you can.
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