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I have never been a snooker fan and was
never particularly interested in the sport but one couldn’t help but
notice the flamboyant star of snooker Alex “Hurricane” Higgins. After
turning professional, he became the youngest World Championship winner
at his first attempt in 1972. It is reported that Higgins earned and
lost a fortune to alcohol and a string of poor investments spending his
last years broke and living in homeless shelters in Northern Ireland
until sadly, he died last month from throat cancer.

This is only one more sorry tale that
graphically illustrates the far too common “riches to rags” saga. In an
interview in 1991 about the reasons why so many high earning
celebrities such as musicians, actors, and sportsmen go broke,
billionaire investor Warren Buffett told an audience that “liqueur and
leverage” were ever-present culprits in financial demise.

It looks like it’s never going to end.

Artistes and sportsmen are particularly
vulnerable when it comes to their personal finances as they face unique
challenges. When celebrity hits and the cheques start coming in, those
who find themselves in this daunting position of wealth don’t realise
that they may be earning a lifetime of income within a relatively short
time frame. Careers are often uncertain and brief particularly for
sports men whose careers come to an end in their 30s or sooner, and one
serious injury could cut short a career overnight. Musicians cannot
predict when their music will stop selling, and an actress or actor
doesn’t know when they will stop getting regular roles.

Don’t neglect your education

It is very easy
when the money starts rolling in to view education as a waste of
precious time that could be used making money. This is a huge mistake,
as the benefits of education will remain long after a career has ended.
Many celebrities shortchange themselves by dropping out of school to
pursue their career and many more fail to return to complete their
education. By getting a qualification, there is a better chance of
earning income even when their celebrity is waning.

Overspending

Excessive spending
is a big reason for celebrities suffering financial misfortune.
Regardless of whether someone is making N500,000 or N50 million a year
there is the possibility of going broke. There are reports of a
Hollywood star that lived a lavish lifestyle far beyond his earning
capacity; he had 22 cars, four yachts, and 15 expensive homes all over
the world some of which he never visited; all came with significant
bills and costs of upkeep.

Mike Tyson, earned
several millions of dollars from his boxing career. It is reported that
he was in debt to the tune of over £25 million including about $13
million in unpaid taxes and about $174,000 for a diamond-studded gold
chain. We are all familiar with Michael Jackson’s story and reports of
his spending over $6 million within a few hours. He eventually lost
Neverland Ranch to foreclosure in 2008.

Hangers on and overheads

Along with their
large incomes, celebrities, including some Nigerians, are no different.
They also have enormous overheads that include: large homes, managers,
agents, stylists, publicists, bodyguards, and other assistants; they
are besieged by family members and friends who regularly require
assistance. Some are naïve and as they become very popular, they fall
victim to those who are willing to pander to their celebrity for
financial gain. Many have entourage; these people constantly surround
them and insulate them from reality, feeding their egos. “Untidy”
personal lives are also a common feature with multiple relationships
resulting in multiple children.

Invest wisely

Their lack of
financial knowledge makes celebrities vulnerable to business owners,
financial advisors, bankers and stockbrokers some of whom may take
advantage of them and who are eager to help them “invest” their
fortunes. Most have never learned the basics of financial management
and end up making poor investments and lose millions.

George Foreman
appears to stand out from many sportsmen; he turned professional at 20
and displayed much financial acumen relatively early. He claims to have
learnt from the financial predicament of boxing legend Joe Louis and
put aside about 25 per cent of what he earned at every fight into a
pension plan. In spite of his commitment to investing he did expose
most of his assets to significant risk in poor investments losing a
fortune.

In later years he
was to become wealthier than he ever was during his boxing career. In
1999, he sold his name and image to the manufacturer of George
Foreman’s Lean Mean Fat-Reducing Grilling Machine for $137.5 million in
cash and stock. His earlier experience of nearly going bankrupt made
him a more cautious investor.

It is hard to cut back

When celebrities
are in their earning prime, spending rises to meet income levels. When
income falls, it becomes difficult to curb expenses quickly enough
either because they cannot break the spending cycle, or because they
have already committed to large purchases and cannot meet debt
payments. It doesn’t take long for one to be broke if income stops and
spending continues for another six months. Sometimes one may be in
denial and may be unwilling to accept the fact that the lifestyle must
change.

One watches with
rapt attention, the exciting growth of the Nigerian entertainment
industry, an increasing crop of outstanding musicians, actors and
actresses, comedians, producers and directors, sports men and women. A
word of caution is important, however. Artistes and sportsmen must plan
for what could be an uncertain future by diversifying earning streams,
investing and protecting the large sums of money earned today. Do not
be complacent. Learn from past examples and protect your future to
avoid the road from riches to rags.

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