Hollywood secrets: 7 big stars and their almost unknown bankruptcies and bonus: 8 best uses for the first $1,000 of your tax refund

Even after a long day of sympathizing with clients as they share financial troubles, I still have ample appetite to consume the latest news story of a celebrity’s financial train wreck.   I cannot pass up a headline announcing the latest financial woes of the famous and telegenic.  Even after a 20 client day, I will still pause to read about a celebrity debt default.   I sometimes ask myself:  How could all of that talent, fame and fortune leave one insolvent? How ever did it happen?

 The layout of this blog post is unique:  following every (ho-hum, yawn) financial inspiration tip of what one might do with the first $1,000 of any tax refund is a little tiny tidbit of irresistible celebrity financial muckraking.

 You will get seven celebrity financial crashes and eight financial advice tips about how you might spend the first $1,000 of your tax refund – all mixed in one package.  I think that is a square deal.

Enjoy!

The average tax refund is $2,913.00 – some of this is understandably might used for “catch-up” on household obligations or to repair aging vehicles.  But if you can spare $1,000.00 of the refund, consider using the $1,000.00 for the benefit of your financial future – so I present eight tips about how to best use $1,000.00 of your 2012 tax refund.

 But on to the crashing celebrities:  We almost all know about Mike Tyson’s 2003 filing for bankruptcy protection and Anna Nicole Smith’s two filings.   But did you know about Walt Disney’s bankruptcy filing?  After bankrupting at age 21, he went on to found a company that grossed $38 billion in revenue last year.

Some of our most loved and respected celebrity entertainers have faced financial woes and were able to reconstruct their lives and finances with the assistance of the US Bankruptcy Courts.

If you are besieged with bills and collectors (or know someone who is) – then reach out to us for a consult and let us open the door to a bright post-bankruptcy future.  Just consider Walt Disney…. he did just fine after bankruptcy.

1.   Tip:  Use $1,000 of your tax refund to open a Roth IRA for yourself, a child or a grandchild (or even a nephew or niece!).  If you, your child or grandchild had taxable income for the year (even if no tax was due or paid) you can usually contribute up to $5,000.00 into a Roth IRA for yourself or that child or grandchild.  But lets take it easy, as $1,000 would be more than a generous.  The Tax Code provides the rest of the generosity as this contribution will grow tax-free year after year, and it can be withdrawn tax-free after age 59.5 years.  What greater gift than to begin the creation of a nest egg for yourself, a loved child or a grandchild – so toss in $1,000.00 and watch it grow!  Even if you or your loved one has financial troubles in the future, the money in the Roth IRA is virtually unreachable by creditors.  Now on to the celebrity financial woes……

2. Celebrity bankruptcy:  Actor Sherman Hemsley “a/k/a George Jefferson” filed for bankruptcy protection in June 1999.  He was unable to repay a $1 million dollar loan and had IRS issues to boot.  After some time he did withdraw his bankruptcy petition after negotiating repayment arrangements with his creditors.

3. Tip: Use $1,000 of your tax refund to replenish your emergency fund – set up a separate savings account for this purpose at a bank where you don’t normally do business.  If you want to REALLY  go for it, set up a paycheck allotment or auto-deposit of $100 monthly into the same emergency fund.  In just two years, this fund will grow to nearly $5,000.00.

 4. Celebrity bankruptcy: Actress Kim Basinger filed in 1993 after a town she purchased in 1989 (at the encouragement of relatives) turned into a financial nightmare.  She had hoped to turn the whole town into a theme park of some sort, partnering with investment company Ameritech.  Also compounding her financial challenges was an $8.1 million dollar judgment against her for withdrawing from the film “Boxing Helena”.  Eventually Kim bounced back well, winning an Academy Award for her film role in “L.A. Confidential” and eventually settling the $8.1m lawsuit for about half of what she owed.

5. Tip:  Get a Professional Review of Your Finances from a fee-only non-commissioned financial advisor – which usually costs less than $1,000.00.  How is this different from calling Edward Jones or Charles Schwab?  There is a big difference, as your local stockbroker is a salesperson, not a truly neutral financial advisor.  Contact the National Association of Personal Financial Advisors for a local referral.  A note of caution: if you have not yet filed your own bankruptcy to be rid of burdensome debt, I doubt that your friendly financial advisor will be able to instantly resolve financial woes.  But once free of hopeless debt, you may have a little extra in the household budget – and this could be wisely invested  in mutual funds, IRAs, GETT educational credits or other funds to suit your family’s long-term needs as recommended by your professional (non-commissioned) Personal Financial Advisor.

6. Celebrity bankruptcy: Crooner Wayne Newton  “a/k/a Mr. Las Vegas” filed for bankruptcy protection in 1992.  His woes then included $20 million in unpaid bills related to a libel lawsuit he had filed against ABC for claiming that organized crime was involved in some of his casino dealings.  By 1999, Mr. Newton was doing better, but again faced financial problems by 2005, including a $1.8 million IRS taxes and $60,000 in unpaid airplane storage bills.

 7.  Tip:  Improve your home’s curb appeal with a $1,000 tax refund trip to Home Depot.  Yes!  You get to go shopping!   $1,000 will buy a trip to Home Depot for some new landscaping shrubs, a stylish new front door with fancy door knocker, a gallon of paint and three pink yard flamingos.  There are two reasons for sprucing up your home: If you have to suddenly relocate and sell your home to chase a new job, you will be glad you took care of this “sprucing up” when you had the extra funds and time.  Plus, coming home to a pretty home after a long day of work or job hunting is truly gratifying.  Don’t own a home?  Then plan “B” for those not owning a home is a little weird – spend $500 on professional wardrobe items and save the other $500 for your emergency fund – because should you eventually want to purchase a home or change apartments,you are going to need that $500 you placed safely in your emergency fund!  Likewise, looking professional at work is never a poor investment.

8. Celebrity bankruptcy: Singer Vince Neil a/k/a Heavy metal band “Motley Crue” frontman.  Mr. Neil has actually filed for bankruptcy twice, the most recent time in 2010.  One of his creditors was his lawyer, to whom Mr. Neil owed $16,000.00, for getting him out of many a heavy metal jam.

 9. Tip: Hire a lawyer to write your will for $1,000.00 from your tax refund.  Yes, you can cheaply use an online form downloaded from the internet from legal zoom or worse and avoid the lawyer fee – but watch out!  There are many issues you might overlook, and legal situations are treated differently state to state, so your Florida oriented form might not work so hot in Washington.  Here are a few examples of subtle issues a lawyer might better address:  Nominations in your will of a guardian to care for minor children, care for pets upon your passing, “health care directives” which direct when the medical establishment should back-off providing medical care to you and finally, addressing confusion between the death division of “non-probate” assets such as life insurance policies, IRAs and 401k’s and “probate assets” such as homes and realty investments.  Special note: if you have not revised your will or changed financial asset beneficiary designations since completing a divorce, you had better get on it!

 10.  Celebrity bankruptcy:  Baseball player Jose Canseco walked away from his 7,300 square foot Encino, CA mansion in 2008.  While technically not a bankruptcy, abandoning your mansion seems pretty darn close to bankruptcy to me.  Jose retired from baseball in 2002 after a long and highly compensated career with the Oakland Athletics.  In 1988, he was the first player in major league history to steal 40 bases and hit 40 home runs in the same season.  Two costly divorces and a steroid scandal laid low Jose’s finances and his mansion was foreclosed.  He tried out for the L.A. Dodgers in 2004, but was passed over.

 11.  Tip:  Hire a personal fitness trainer and diet coach with $1,000.00 from your tax refund.  Try two sessions per week (one hour per session) at between $50 and $75 per hour to learn modern fitness technique.  This seven to ten week investment may be the best money you ever spend.  Fitness trainers and diet coaches are not just for movie stars any longer.   I know that trainers work: Before starting with my trainer, I had never heard of “short burst cardio” – “burpees” – “bosu balls” – “kettle bells” – “arnolds” or “skull crushers”.  With a richer vocabulary, a slimmer midsection and a much more positive mental attitude I strongly recommend a fitness coach.  I revolutionized my diet with the trainer’s help and went from 219 pounds down to 201, dropping six inches off of my waist from 38 to 32.  If not for the personal trainer, I would still been stuck in the same old unsuccessful exercise rut.  Try the trainers at the YMCA for economy – but if you want the best, then try “The Club at Gig Harbor”, where I meet my trainer.

 12. Celebrity bankruptcy: Mark Twain filed for bankruptcy in 1894 after a failed investment in an automatic typesetting device called the Paige Compositor.  The investment cost Mark Twain his fortune (and also cost much of the inherited fortune of his wife), but he bounced back after bankruptcy.  He went on to replace at least a portion of his fortune as a lecturer.  Ironically, the man who coined the phrase “the Gilded Age”, Mark Twain, went broke.

 13. Tip:  Spend $1,000.00 of your tax refund to beef up career skills.  Consider courses at community colleges or some on-line courses to strengthen the weaker portions of your resume and experience.  A stronger resume can ease a transition into a new position with your current employer, or provide you with a new classroom learned skill that will be a focal interview “talking point” if you are interested in reaching out to new potential employers.

 14. Tip:  If you have not yet paid off your debts in full, then invest $1,000.00 of your tax refund money in the bankruptcy services of James H. MaGee.  Each year that you toil along with debt means one less year to accumulate adequate retirement savings and one more year of hope-robbing and health-corroding stress.  A bankruptcy case can often mean quickly restored creditworthiness – call us for a consult, and I can explain how and why!  253-383-1001 www.washingtonbankruptcy.com

The Law Offices of James H MaGee Washington Bankruptcy Attorney
1108 N 6th Street TacomaWashington98403-1615 USA 
 • (253) 383-1001

Tags: , , , , ,