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Do you know the way to bankruptcy court?

Dionne Warwick is the latest in a long list of celebrities who failed to properly manage their money.

By MSN Money Partner Mar 28, 2013 12:28PM

This post comes from Len Penzo at partner blog Len Penzo dot Com.


Len Penzo dot Com logoGrammy Award winner Dionne Warwick -- who found fame in the 1960s singing "Do You Know the Way to San Jose?" -- filed for bankruptcy last week.


File photo of singer Dionne Warwick in March 2012 (© Jonathan Alcorn/Newscom/Reuters)Younger folks may recognize Warwick from the 1990s, when she was the celebrity spokesperson for the Psychic Friends Network, or as a member of "Hollywood Squares" in 2002. She was also on "The Celebrity Apprentice" a couple of years ago.


Despite all of her success, Warwick is now almost certainly poorer than you, me and even the local bag lady -- at least on paper.


In fact, here is a breakdown of Warwick's current assets and liabilities:

  • Total assets -- $25,500.
  • Total liabilities -- $10.7 million, including $7 million owed to the IRS and $3 million to the state of California.  

A statement by a representative of Warwick seemed to blame the IRS:

"In light of the magnitude of her tax liabilities, Warwick has repeatedly attempted to offer repayment plans and proposals to the IRS and the California Franchise Tax Board for taxes owed. These plans were not accepted, resulting in escalating interest and penalties."

Although she's a relatively minor star today, Warwick's stated monthly income is still a whopping $20,950. That's more than a quarter-million dollars per year.


Now, I know what you're thinking: How in the world can anybody go bankrupt if she's earning $250,000 annually?

In Warwick's case, her monthly expenses consumed 99.95% of her income ($20,940) -- including $5,000 on housekeeping and $4,000 for a personal assistant. That's a recipe for financial doom no matter how much lucre you're bringing in each month.


As a point of reference, my monthly household living expenses -- for everything from the mortgage to entertainment -- currently come to, on average, just a hair over 50% of my income. That provides me with a nice cushion for distributing the remainder of my income to stuff like my rainy-day and emergency savings accounts, my long-term savings for big-ticket purchases, my retirement fund, and -- oh, yes -- my taxes!


True, the cushion wasn't always that big. A quick check of my expenses spreadsheet shows that 12 years ago household living costs consumed 75% of my income. But it was still enough to ensure I could meet all of my obligations and responsibilities in life.


How Warwick thought she could continue to do the same by saving a nickel out of every $100 she earned is tough to comprehend.


The bottom line is, financial freedom doesn't depend on money so much as it relies on a commitment to fiscal discipline and personal responsibility.


Remember, there are lots of folks out there earning millions of dollars every year who aren't financially free, just as it's also true that there are folks earning less than $40,000 who are financially free.


Dionne Warwick is just the latest in a long line of millionaire celebrities whose spectacular financial failures can usually be traced back to the same flaw: a steadfast refusal to spend less than they earn.


More on Len Penzo dot Com and MSN Money

Mar 28, 2013 2:29PM
Shouldn't the Psychic Friends Network have predicted this and at least let her know her future?
Mar 28, 2013 2:11PM
Can someone explain to me why these stars who make tons of money, don't pay their taxes when they can obviously afford to?  I don't feel sorry for any of them who get in trouble with the IRS!!
Mar 28, 2013 1:30PM
Another "who cares" story. If you are that stupid, you deserve to be broke.
Mar 28, 2013 2:11PM
Well, one thing would be to drop the $5000 a month for housekeeping and the $4000 a month for a personal assistant. I guess she is too used to having slaves (paid, but still doing the work "beneath" her) and can't do anything for herself anymore?
Mar 28, 2013 2:31PM

Housekeeping $5000 / month?  Hell, I'll scrub her floors for $4000 / month!

When people spend this kind of $$ so stupidly they shouldn't be allowed to claim bankruptcy!  Sell her assets & let her get an apartment.

Mar 28, 2013 2:23PM

I have a hard time feeling bad for rich folks who blow all they have to live a lavish life style they cannot afford. Tough luck,pay your bills dead beat.


Mar 28, 2013 2:11PM
So basically when things slowed down for her she didn't scale back and felt entitled to a lavish lifestyle.  Cool story bro
Mar 28, 2013 2:08PM
A !!!FOOL!!! and their money are soon parted. Is this new to anyone? So many people nowadays don't even get the chance to possess this idiot's amount of income, much less squander it, as she's seemingly done. Pity.
Mar 28, 2013 1:57PM

Ha ! Ha !   Cry me a river !!   Oh,  that could be a new song for her !!??


CRY ME A RIVER , WHILE THE IRS DELIVER .....................................................

Mar 28, 2013 3:12PM
Just Becaue you refuse to accept that you can't continue living in the same style you are accustomed to doesn't excuse you. She doesn't need to spend $5000 for housekeeping, and She needs a Personal Assistant for WHAT? I wouldn't be surprised if Whitney Houston was bankrolling her when things started gettting tough. THE IRS NEVER GOES AWAY, so it looks like She has a real problem. let's try not to make this political, if possible. Politics didn't cause her problems. She did it all by herself.
Mar 28, 2013 2:00PM
She probably was following the Obama money management system - spend all the money you want and then when you run into trouble, spend more.
Mar 28, 2013 2:28PM

I wonder if she will blame BOBBY BROWN for this? 

Everything in that family and extended families life the last 5 years has been blammed on Bobby Brown.  What is her excuse for not paying taxes on stuff dating back to  1991.  lol

Mar 28, 2013 3:03PM

A "who cares" story?  We should all care!


When people live outside of their means, we all pay for it in the long run.  Credit Card companies increase your interest rates and fees, lenders are more wary about loaning money, and our individual share of national and state debt increases when people whelch on their $10.7 million tax bills.  These are just a few examples of how this affects each of us.

Mar 28, 2013 2:51PM
At 165 hours per month for her maid that's over $30.00 / hr. The maids down  at the Comfort in are going to think they are way underpaid.
Mar 28, 2013 2:49PM

There is a lot of 'rich folk' bashing going on here. I see this happening with average people all the time. That's why so many people are in bad financial shape today. They live in buy big houses they can't afford, fill it with expensive furnishings, flatscreens in every room, cable tv with more channels than any human being could watch. Fancy cars with gps, cd stereo and every other fancy thing they can add. Expensive clothes and shoes. $200 pair of sneakers. Ipad and Iphone. Expensive laptops with internet. Eating out several times a week. Double shot Lattes at Starbucks. Eat fast food, fried greasy foods, junk food. Watch tv, play video games, or go on Facebook, Twitter, or some or social network. And then complain that it's Obama's fault because they don't have any money, and the healthcare system is screwed up.


I don't know many responsible, mature, healthy people who complain about the government. Their probably too busy working, saving their money, reading, going to school bettering themselves, exercising, walking, running, swimming, and god-forbid, living within their means. There are people who lost a job, or who were injured, or do have a valid reason for their situation, but the VAST MAJORITY of complainers are people who have never learned to take responsiblity for their actions, don't know how, or simply refuse to.


Don't worry, you're not responsible for your health and financial situation because it's everyone else's fault. Especially the government!

Mar 28, 2013 2:36PM
If she knew the way to San Jose maybe her luck would change!
Mar 28, 2013 2:59PM
She must have gotten her financial discipline from President Obama and the Democrats since they cannot grasp the spend less than you earn motto.
Mar 28, 2013 3:29PM
I would like to know what will happen now that she can't pay the taxes.I will bet not a thing and that's why they wern't paid in the first place.You certainly can't say the same for the rest of us po folk.
Did you see her on Apprentice? She clearly has issues..
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