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.
This post comes from Len Penzo at partner blog Len Penzo dot Com.
Grammy Award winner Dionne Warwick -- who found fame in the 1960s singing "Do You Know the Way to San Jose?" -- filed for bankruptcy last week.
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
- Why my kids shouldn't plan on receiving an inheritance from me
- Why I prefer a spreadsheet to track expenses and manage my finances
- If you can't live on $40,000 per year, it's your own fault
- 20 penny-pinching celebrities
- FTC tells celebrity endorsers on Twitter: Disclose all
- Steven Tyler screams for celebrity privacy
VIDEO ON MSN MONEY
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.
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.
Ha ! Ha ! Cry me a river !! Oh, that could be a new song for her !!??
CRY ME A RIVER , WHILE THE IRS DELIVER .....................................................
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
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.
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!
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