Another Celebrity Bankruptcy…

March 29, 2013

Here we go again!  Yet another celebrity has filed for bankruptcy.  Dionne Warwick owes over $10 million in accrued penalties and interest from back taxes along with other debts and this combination of debts drove her to insolvency. (Couldn’t her psychic have warned her about this???)  She has an income of $21,000 per MONTH and expenses to match plus, lots of debt on top of that! Hey, with that kind of financial track record we should send her to DC as a member of Congress. If it sounds like I’m a bit less than sympathetic here, it might be because my initial reaction is one of frustration.  Here’s why:

Over the last several years, I have met with a number of people who have had significant financial hardships.  Some of them have been able to work with credit counselors, some have made financial settlements with their creditors, some have lost their homes to foreclosure and some have had to file for bankruptcy.  These have all been hard working, everyday people without the luxury afforded celebrities.

With some basic financial management skills, Dionne Warwick, Mike Tyson and countless other celebrities could have been financially set for life rather than filing for bankruptcy.  Many of them earned in one year more than most people will earn in a lifetime.  Yet, they still managed to end up in the same place as the people I’ve met who have experienced financial hardship.

How is it that no matter how many extremely high income earning (if only for a short window of time) people declare bankruptcy that others in a similar situation don’t learn from those mistakes and repeat them instead? We live in a world where fame and celebrity are glamorized and where spending and consumption and showing the world an outward view of success seems meaningful. All of these things are fleeting and can be gone as quickly as they entered one’s life.  The news is filled with stories like this. Singers, actors, athletes, authors…the news is filled with household names who HAD fame and fortune once and are now broke.

This is a broader societal issue and one that gives me both reasons for hope and for doubt.  On the doubt side, it seems like these stories are never ending.  While many people are forced to file bankruptcy through no fault of their own, I also regularly meet people who are on a direct path to bankruptcy that is completely preventable with a few behavioral tweaks. Yet, they often seem to not want to accept personal responsibility for their role in getting there. As a society, we seem to be less and less willing to accept personal responsibility and more willing to point the finger of blame and that trend doesn’t look like it’s going to be reversed any time soon.

On the hope side, the financial wellness market is growing. More and more companies are adding financial wellness benefits to their benefits lineup. There are popular personal finance books, websites, apps and programs that are growing in popularity.

We are becoming more financially literate as a society.  Where once, teaching all kids to read seemed like an insurmountable task, it’s been accomplished. There isn’t yet a national movement to teach financial literacy that has gained momentum, but I could see that being a part of our country’s future. It certainly would help!

I meet young people regularly who have seen their parents struggle financially over the last 5-10 years and want to position themselves so that they don’t repeat their parents mistakes. Is the pendulum swinging in the other direction now? It might be too early to call it a trend, but I’m seeing some positive signs.

Every time I see a celebrity bankruptcy (hey, that sounds like it could be a new reality TV show…) my mind drifts to the thought of “How do we fix this problem?” not just for those celebrities, but for our entire society.  Financial literacy being taught at a young age HAS TO BE a part of the solution.  Making a personal finance class a required high school class would be enormously helpful. De-mystifying money, making financial conversations less of a taboo (I’ve met lots of people socially who are far more willing to talk about their love life than their financial life) could go a long way toward a broader solution. I believe that one day we will get to the point where stories like this are far less easy to find on a daily basis.