In Budgeting, Money, Wealth

Even celebrities have to manage their money or risk losing it all

Rihanna is saying her accountant Gounis from Berdon LLP screwed her in the following ways:

  • Didn’t tell her she was running out of cash (went from $11 million in cash to $2 million at the end of 2009)
  • Took a 22% commission to manage her finances
  • Didn’t advise her or warn her when her expenses were doubling
  • Advised her to buy a $7 million dollar home which she ended up selling at a loss of $2 million

Source / Source

Know what I am gathering from these facts above?

That even celebrities who “only” have $2 million in cash, are just like the rest of us humans.

People, the truth of the matter is that your money doesn’t care how smart or successful you are — you, RiRi and everyone else on the planet are not immune to the basics of money management.

There are plenty of celebrities who have run into money woes in the past, here are the two most notable for me:

Let me lay it out for you:

NO ONE CARES MORE ABOUT YOUR MONEY THAN YOU DO

No one.

Not your wife, husband, best friend, your mother, your uncle, or your dog.


No one should care more about your money than you, because it is YOUR money.

If you let other people do the caring for you, they will certainly look out for #1 …that is, themselves, and that means lining their pockets with your hard earned gold.

I mean 22% as a fee to manage your money!?

I’d have my hackles raised at such an amount being skimmed off my earnings. I agree with paying a professional if you do not have the inclination, interest or time to do all of it yourself, but 22% is just highway robbery.

YOU HAVE TO KEEP AN EAGLE EYE ON YOUR OWN FINANCES

In keeping with the above, you don’t need to micromanage your money the way that I do, but you have to at least have an idea of what you spend as a budget each month, and that only comes about if you track your expenses.

You don’t have to do this yourself — hire someone to go through your credit card receipts and bank statements, then give you a neat little file or summary at the end of each month for you to review.

They could even point out things like: Your spending in restaurants has increased by 25% or X amount of dollars since the last month.

stock-wedding-marriage-food-table-celebration-party-2

You may not care if you already spend millions, but at least you’ll know if you’re starting to spiral out of control.

I know a guy who inherited a lot of money from his grandparents when they passed, and every month he hands over a shoebox of receipts to a bookkeeper which she goes through, logs everything and sends him a neat little Excel file with charts and a summary.

I have no clue what he pays her, but it must be totally worth it for him to NOT have to do the minutiae of such tasks.

YOU HAVE TO UNDERSTAND WHAT YOU ARE SIGNING

So back to that 22% commission for handling Rihanna’s money, in my eyes, the bottom line is that she signed the papers.

If she didn’t have a trusted advisor there to look over her papers and point out this 22% fee, or to advise her to find another firm, it’s kind of her problem.

It goes back to rule #1 — if you don’t care about your money and let others care about it for you while you stick your fingers in your ear and go “lalalalalalala”, you’re going to run into trouble.

You should read all the papers you are signing, or hire someone impartial and independent to read them for you and give the basics to you in a summary.

With all that money up for grabs, there are people out there who will say and do anything to get their hands on your money, and this doesn’t apply to celebrities like Rihanna, it also applies to commoners like us who do rather silly things like pay banking fees when we don’t have to, ATM withdrawal fees, high management expense ratios for our investments and for services in general that bring absolutely no added value for the money paid.

Let Rihanna’s situation be lesson to us all — even celebrities with tons of money are not immune to making rather ill-informed and careless decisions about their money.

(P.S. she is worth $90 million now, so don’t cry too hard tonight.)

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Sherry of Save. Spend. Splurge.

Millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using TheBudgetingTool.com. Since then, I have paid my $600K home in cash (my half was $300K), my $180K casr in cash, worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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24 Comments

  1. Free to Pursue

    It is an issue for the average person. You MUST take care of your money! You have to care!

    Just this past year, my financial advisor was passing on my account to another advisor because he was moving to another country. This advisor had been a friend of mine for years and knew I was a buy and hold type of client, so we had agreed on a fixed fee for managing my account going forward, in front of this new advisor. Once my previous advisor left, this new advisor, in one phrase “I know you had a fixed fee with [previous advisor], but we’ll be moving to a 1% yearly management fee instead” tried to TRIPLE the fee on an account and my behaviour had NOT changed nor did I intend it to. Apparently, he thought I was too dumb to do the math in my head (1% of portfolio/current fee = 3X the cost). I was furious but did not show it and just decided to take my business elsewhere. I mean, how could I trust him after the bait and switch!

    I did the quick math when I got home and in 10 years’ time, that fee was going to cost me an additional $20-30K, depending on my overall portfolio performance, assuming I didn’t add to it! Ridiculous for a portfolio that didn’t require active management.

    Know what you pay! The fees and commissions are often hidden. 1% in fees adds up, as this is part of the return YOUR money made that you never get to benefit from.

    Reply
    1. save. spend. splurge.

      I could not agree more. This is why reading the fine print, checking MERs, fees.. all the things that quietly eat away at your returns is a big deal.

      Reply
  2. Michelle

    This is very common for celebrities and athletes to do. Oprah (love her or hate her) signs all of her checks. No one else has final authority over her finances. I think the other issue is how much financial literacy do people have prior to large windfalls? It’s obvious that RiRi finally wised up, but she was also very young when she started to make good money. Her parents might not of had the financial awareness needed to manage such a large amount of money. She’s lucky to discover this issue at this point in her career-before she becomes irrelevant.

    Reply
  3. Lila

    I read how many celebrities and wealthy people got taken by the Madoff pyramid scheme. That really sucks and it shows that they are as vulnerable as the rest of us.

    Unfortunately for many people, celebs included, finances are boring and best left to be handled by someone else, this being an adviser, a parent, an S.O and the end result is normally the same, the person handling the finances gets greedy and they take the celebrity for all they’ve got.

    In my opinion, I prefer to handle my finances myself. A long time ago, I didn’t care but I came to realize what you wrote here a few years ago, that no one cares about your money the way that you do.

    So I started learning about it and yes at times it is boring, but then I remind myself that if I want a good life I need to continue learning. Kind of like if you want a good life, you also need to go and exercise and stay away from eating high calorie foods.

    I think if you have an adviser, it helps to get online to your accounts and see what is going on and ask questions. Perhaps they are less likely to sponge off a client that asks questions about their own accounts and keeps tabs on their portfolio by logging in at least twice a month.

    Reply
    1. save. spend. splurge.

      @Lila: That’s what I’m thinking!

      If you pay attention to your money and show that you’re paying attention to your money, people are less likely to try and scam you. If you act like it doesn’t matter, they’ll give your money a shot more often than not.

      Reply
  4. dubious

    I’ll bet if she had been attempting to “manage” her own money, instead of having the accountant take the 22%, she would have ended with with less than the purported $2 million.

    Reply
    1. save. spend. splurge.

      @dubious: *laugh* MAYBE!

      Who knows? 🙂

      Reply
  5. Samuel

    Doesn’t matter who you are, the money is going to go fast if you don’t have your own eye on it.

    Can’t believe she lost profits through a poor management firm. Tells you that even they don’t care what’s going to happen.

    I thought she was worth more than that?

    Thanks for the post!

    – Samuel

    Reply
    1. save. spend. splurge.

      Well she’s worth $90 million now, if that helps any.. or so celebrity net worth says.

      Reply
  6. Kathy

    Just because someone has a talent like a singer, actor or athlete doesn’t mean they are smart. They are not automatically smart about politics, world affairs or finance. I know many people try to emulate these celebrities or take their advice on what insurance to buy, or how to vote or how to spend their money. But the fact is, many of these people are discovered before they have ever had even the chance to be educated so it should come as no surprise that they often get taken, sometimes by the people they hire. But as you said, they signed the contract which I’m pretty sure spelled out the commission. As for buying an expensive house, I’m sure at the time she thought it was worth what she paid. She liked it enough to put out that much money so I’m not crying crocodile tears for her. They like living the lavish lifestyle with the entourage that accompanies them so I don’t see they have much to complain about. So she “only” has $2 mil left? Well, hubby and I are only $300K shy of that ourselves but I bet our lifestyle in no way approaches hers in terms of how we spend. Perhaps if celebs would spend as much time looking at their finances as they do clubbing, they’d be better informed about their own situation.

    Reply
    1. save. spend. splurge.

      They don’t need to be smart but they do need to at least hire smart people!

      Although truth be told, a lot of people who signed for subprime mortgages knew what they were getting into as well.

      Reply
      1. her every cent counts

        @save. spend. splurge.: I think it’s probably hard as a celebrity or publicly wealthy person to get quality financial advice. She was probably recommended this firm by another person of her status only to find out that they f’d her over. It is important to note that no matter how much you make you should pay attention to your finances.

        Reply
  7. katherine

    So true! You always have to look out for yourself first.

    That’s why I like to try to understand and control as much of my own finances as possible. The more you know, the less likely someone can pull something sneaky.

    Reply
    1. save. spend. splurge.

      @katherine: At least be aware of it even if you aren’t dealing with the day to day details.

      Reply
  8. Debt and the Girl

    No one is immune from monitoring their own finances even if you are rich and famous. You need to surround yourself with good people or risk getting burned like Rihanna. Its the same story over and over again. Hollywood really needs to learn.

    Reply
    1. save. spend. splurge.

      @Debt and the Girl: Not just Hollywood! I think a lot of people think once you’re rich, you are immune to any kind of problem, which is not in the slightest bit true.

      Reply
  9. Mark Ross

    Great article right here with a very nice lesson. Knowing how to manage your very OWN money should be a priority and one shouldn’t rely too much on to others in managing their finances.

    Reply
    1. save. spend. splurge.

      @Mark Ross: Or if you do, keep tabs on them.

      Reply
  10. Cindy

    SMH!! That’s zoo true!! Maybe if she’d stop her partying for a while then she would have notice she was out a lot of money.

    Reply
    1. save. spend. splurge.

      Or just paid attention to where it was going in a budget 🙂

      Reply
  11. LAL

    How is she worth $90 million but only $2 million and running out of cash? I don’t get how do they all celebrities net worth?

    Reply
    1. save. spend. splurge.

      As I stated, she is worth $90M now.

      She wasn’t back in 2009, when she only had $11 million in cash and then ended up with $2 million at the end of the year after the accountant allegedly bilked her.

      Reply
  12. Charles@gettingarichlife

    $90 million net worth isn’t helpful if she’s cash poor and runs out. That’s a lot of expensive umbrellas. You’re right no one cares more about your money than you, stop giving it away.

    Reply
    1. save. spend. splurge.

      True. I’m pretty sure if she had $10 million in reserve before, she may be upping that reserve.

      Reply

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