Debt is like any other trap, easy enough to get into, but hard enough to get out of. – Josh Billings
That’s right. Avoid debt like the plague. Well there you go. The secret to building wealth is wide open. Cat’s out.
I will give you some great insight here. You cannot go bankrupt if you are debt free. When you owe $0, then you are truly free my friends.
Nothing puts people in a financial fiasco quicker than leverage.
Debt, we’ve learned, is the match that lights the fire of every crisis. Every crisis has its own set of villains – pick your favorite: bankers, regulators, central bankers, politicians, overzealous consumers, credit rating agencies – but all require one similar ingredient to create a true crisis: too much leverage. – Andrew Ross Sorkin
Let me provide you with some cautionary tales. They are truly scary. So please avert the kids eyes when you are reading this.
Okay, here it goes. I am no Chaucer, but I will do my best to make this plot jump right out to you. Hopefully it will inspire you to action. Please be forewarned. STAY. AWAY. FROM. DEBT. It has the ability to turn happy people into bitter human beings. People are more likely to tell you about their political, romantic, or extracurricular actives than they are the amount of credit card debt they are in.
Cautionary tale numero uno: Adrian Peterson. According to CNBC, NFL star Adrian Peterson made close to $100 million but apparently can’t pay his debts. The star running back is in court against a McAdoo, Pennsylvania-based creditor over failure to pay a $5.2 million loan. With interest and legal fees, the sum claimed is about $6.6 million.
He currently owes a total of $10 million in debt obligations, but recently signed an NFL contract for a two-year extension for $5 million.
Now I’m no mathematician, but if I subtract 10 from 5 that would equal 5. Meaning he is $5 million dollars short of being able to pay what he owes. This does not include any other cost of living expenses he has. In addition, Mr. Peterson is in his twilight years.
Just investing 1 percent of his $100 million in earnings, $1 million, could have netted him another cool million in investment returns if he earned 8 percent. That is without catching another pass, running an interception, or even showing up for work. He LITERALLY would have only had to keep breathing to make that money.
Losing $100 million is my worst nightmare. This is one of the worst horror tales I have ever read and that is because this is reality: Pure fact and not fiction.
Cautionary tale numero dos: Pamela Anderson. One of the most recognizable female celebrities in the world as she has graced the covers of hundreds of magazines including having the distinction of being the most photographed Playboy Playmate 1989-2016, with a record 14 Playboy magazine covers.
She too had a run in with Mister Debt. At one point, she was in $1 million of debt due to housing costs. She stated at the time that it happened to a lot of people in Hollywood. Although, she stated that she is now okay, she did state that was a very stressful couple of years.
My suggestion is this: stay away from buying huge homes. Mansions costs tons of money to upkeep.
For example, a $3.6 million-dollar mansion will likely cost you $100,000 annually for maintenance, utilities, property taxes and upkeep. Over 10 years, you would have paid $1 million dollars just to have a place to put those $500 Manolo’s.
Let’s think for a second. A $90 million-dollar mansion in Beverly Hills could cost you $2.5 million annually. Over a decade that is $25 million dollars! I am starting to see how people like Charlie Sheen, who famously once earned over $1 million per episode of Two and a half men, could end up in court stating he is in dire financial straits less than 10 years later. With expenses like these, who can save! I am also starting to see how Nicolas Cage ended up owing $6.2 million to the IRS! My last tale will surely leave you shaking in your financial boots (hopefully paid for with cash).
Cautionary tale numero dos: Johnny Depp. After earning $20 million-dollar paychecks with Pirates of the Caribbean (Disney fired him from this role in 2019), and estimated lifetime career earnings of $650 million, it was revealed that Captain Jack had a spending and debt problem.
According to CNBC, this is what Mr. Depp spent every month:
- $30,000 on wine
- $300,000 on staff, including 40 full-time employees
- $150,000 on security for himself and his family
- $200,000 for a private jet
You could support small countries on what he is spending!
For $30,000 a month on wine, it better heal the sick, make the blind see again, and wash away all sins!
This last fiscal tale truly has me quaking in my paid for running shoes.
In every story I have ever heard or read, people built their wealth by living on less than they earn.
That is how I was able to pay off $50,000 of debt and then begin saving and investing over 40 percent of my income. I did it by earning and saving one dollar at a time.
Ditch the plastic and embrace cash my friends. It seems the folks in Hollywood all have humongous mortgages that are handcuffing their wallets and keeping their financials in a tailspin. Please do the opposite and keep low fixed expenses. Thank you for listening. I’ll be here all week.
