Rich & Famous People With Smart & Dumb Money Habits

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Rich & Famous People With Smart & Dumb Money Habits simple money man

Some are born rich, some inherit it, and some work their butt off to acquire it. How the rich use and spend their riches may also contribute to their continuing to be rich. Wow, that sounds kind of confusing :-/ But don’t worry, I’ll straighten it out. And in the process, we’ll come to realize that rich people are not a whole lot different than us. They save regular, they invest, a lot of them live below their means and have an overall simple lifestyle.



How They Save & Invest


The rich know the importance of saving. They know in order to do save meaningfully they must live below their means (which is still living large anyway for them).


Per Investopedia, “while it might not be common to think of the ultra-wealthy as savers, UHNWIs know that living below their means from day one will allow them to achieve their desired level of wealth in a shorter amount of time.” The article also talks about how they invest which is similar to probably many of us: diversifying in a class of assets and intangibles, rebalancing quite often it appears, and looking at the broader emerging markets apart from the US and Europe.


It’s easy to limit our investments in products or services we know or are familiar with using. But the risk is that we may not be diversified enough or over-saturated in one particular sector. For a while, I was over-saturated in technology stocks such as Intel – INTC. At one point I thought, if I could put a lot in this one stock, it could increase my chances of a big FAT return, and was ignoring the risk of not diversifying. Fortunately, my conscious came to my rescue before I suffered losses and was able to slowly reduce my position and instead buy into ETFs.


Another strategy rich people employ as illustrated by Market Watch is using taxes to their advantage. The rich want to pay as little tax as possible on their income. Actually, all of us do, right 🙂


But the rich have more to pay, so they’ll do things like invest in municipal bonds which don’t require the interest earned to be subject to federal taxes. And another strategy is to try and reduce their income as much as possible because lower income can mean lower payment of taxes. In order to achieve this, the rich will incorporate their business. In doing so, they will pay themselves a reasonable salary and take the rest of the payments as dividends which is taxed at a lower rate.



How They Spend


So here are some examples of real live rich people and their surprising spending, or lack of spending habits in these cases:


  • Kawhi Leonard of the San Antonio Spurs still drives his 1997 Chevy Tahoe which is paid off
  • Chris Rock still drives his old Nissan Altima
  • Warren Buffett still lives in the same house in Nebraska he originally bought for ~$31,000
  • Mexican billionaire Carlos Slim still lives in the same home for the past 40 years and doesn’t even own a private plane
  • Mark Zuckerberg wears basic clothing pretty much every day (t-shirt and jeans – probably not the $300 pair ones either)
  • Ryan Broyles who played for the Detroit Lions budgets himself $5,000 per month and uses the Personal Finance Mint software!



So really there are many rich people who live like average Joe’s. Or I suppose they practice stealth wealth.


It’s good for a couple of reasons: (1) lower the risk of getting robbed, (2) lower the risk of long-lost relatives and friends to come knocking at your door for a short-term unsecured loan J, (4) you can have regular friends who don’t know you’re rich and thus you won’t have the pressure of keeping up with the Joneses because you don’t know any of them anyway, and (3) random organizations which you may have nothing to do with and don’t support soliciting and asking for donations.



Famous People That Went Bankrupt


As crazy as it sounds, some famous people out there weren’t able to stay rich for various reasons. So that we don’t make the same mistakes, here are a few examples:


MC Hammer – in 1990, his income was $33 million. A few years later, he only had $1 million and over $10 million in debt. He said it was because he employed hundreds in his community and apparently wasn’t able to pay them. Lesson learned: it’s great to help others, but don’t bite off more than you can chew. On a positive note, he has bounced back and is now investing in start-up apps.


Larry King – before his big show on CNN, Larry King was arrested in 1972 for grand larceny and stealing. As a result, he struggled to find a job and had to file for bankruptcy with over $352,000 in debt. He lucked out with CNN and is worth over $150 million now. Lesson learned: a mistake in the past can cost years of credit detriment and joblessness.


Mike Tyson – earned $400 million in his boxing career. However, he filed for bankruptcy in 2003 as his debts included a divorce settlement of $9 million, $13.4 million owed to the IRS and $4 million owed to the British tax folks. Lesson learned: consider a prenuptial agreement if you think your marriage may not last J, and don’t mess around with tax authorities – foreign or domestic.


Source: Business Insider


So is there anything you’ve learned from the rich in famous in terms of what to do OR what not to do? Does their lifestyle surprise you?






I use Personal Capital because (1) it’s free, (2) it tracks all of my accounts and overall net worth, (3) my account balances automatically update, (4) it shows how my investments are diversified and allocated in various sectors, and (5) can use built-in tools like “Investment Checkup” to get….wait for it…free personalized advice!



14 thoughts on “Rich & Famous People With Smart & Dumb Money Habits

    1. Thanks! Yes and it seems like rich and famous may think their means really skyrocket when they make it. But you got to account for things like taxes and renegotiation of contracts too to really realize how much you have and how to optimize it.

  1. Isn’t this the freaking truth. I hate seeing a hard working, talented person lose all their money because they didn’t know how to manage it. Nothing worse than seeing all that hard work squashed.

    1. Even though I think I know a little teeny weeny bit about PF, if I really made it big, I’d probably hire a money manager at least for a little bit. At best, it’s another set of eyes checking to make sure you are not at risk in any sort of way and can continue to build your wealth in a strategic and risk appropriate way.

  2. Live within your means is the big one. Way too many athletes and celebrities today buy the big houses and the fancy cars because they are making a lot of money now, only to go bankrupt in 5 or 10 years. My husband is a big football fan and you often see this happen with football players because their careers are so short. They don’t realize that while they may make something like $5 million a year now, if they are spending all of it while they make it they won’t have any left for when they can’t play football anymore.

    1. Very applicable to football and other sports that really take a toll on your body. Situations like these require extra planning because not only is your career short, but a career ending injury can happen anytime and the risk is so much higher. I understand work hard and play hard…but how about plan hard 🙂

  3. I just learned that millionaires also think think differently than billionaires do. This is when intent and self awareness come into play. Great post.

  4. Some famous people spend money like it will be coming in forever. If you are an athlete who makes a few million a year and you spend a few million a year, you can’t possibly maintain that. One injury stops your incoming cash flow almost permanently. That is why they go bankrupt. Should be saving instead of spending.

    1. And it’s so imperative for them to have a financial adviser because all they know is their sport or acting, of whatever they specialize in. When the money comes in, it becomes so tempting. It should be like regular payroll where a certain amount is saved after every performance for retirement etc.

  5. I feel like the newly minted rich should listen a lot closer. Those that grind through life to achieve their wealth seem to do better than those that instantly become millionaires. I think I read that 60% of all NBA players go bankrupt within 3 years of leaving the league which is really unfortunate considering the amounts of money that they make. Fun post that I enjoyed reading 🙂

    1. Glad you liked it! It’s true that when you work and build wealth slowly over-time, you may value it more and take steps to secure it. With instant millionaires (who probably make more in short spurts) also spend more….in short spurts 🙂

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