CNN recently reported on grand money mistakes made by the rich and famous. Think it doesn’t apply to you? It might.
- Real Estate: Don’t overbuild your neighborhood. If the kitchens in your neighborhood are formica, don’t install granite in yours and expect the value of your home to go up. Likewise, when shopping for a home, don’t buy the biggest or most expensive home in a given neighborhood. For example, if you’re looking in a neighborhood where most homes are $250,000 and the home you want to buy is $300,000, it will be harder to sell that home later for the simple fact that people who are looking for a $300,000 home won’t come to your neighborhood.
- Depreciating Assets: Anything with a motor goes down in value. Cars, boats, motorcycles, jet skis, all of it. They are toys, not investments. A good rule of thumb is that if you add together everything you own with a motor in it, the value should equal no more than half of your annual household income. Otherwise you have too much money tied up in assets that are going the wrong way.
- Hot Stock Tips: I don’t advise investing in single stocks, period. Too volatile. Christie and I invest in, and recommend our clients invest in, good growth stock mutual funds and hold them until retirement. (We don’t sell them, that’s just what we personally do) If you do play in stocks, make it no more than 10% of your total net worth.
- Taking Financial Advice From Friends: LOL, your friends are broke. They might have a nice house or a nice car, but in most cases it owns them, they don’t own it. Don’t take advice from broke people in debt.
- Investing In Restaurants: Yeah this doesn’t apply to me either. But the general principle would be, don’t put your money into something you don’t intimately understand. I doubt seriously if anyone investing in Planet Hollywood had ever managed or worked in a restaurant before.
- Cashing Out When The Market Drops: This is one good reason why you want to have a good investing professional in your corner – to talk you down from the ledge when you feel like jumping. The market has gone down dramatically before. AND I PREDICT…it will do so again. I don’t know when, and it doesn’t really matter. Don’t sell. Keep buying. Buy when the market is up, and buy when the market is down. Don’t worry about what happens in the short term. We’re in this for the long haul.
- Spend It Before You Get It: I’ve known people who anticipated getting a bonus, and buying new furniture or a new truck. And then didn’t get the bonus. Ooooh, that smarts. Like, a lot. Don’t do that. Don’t ever spend money you don’t have.
What did the article miss? Anything you can think of? What other goober moves have you heard about celebrities doing that you can learn from? Sound off below!