I'm happy to end our "financial week" with a post from Lisa Cintron, Executive VP at Advisorworld.com and financial blogger. Enjoy her take on personal finance:
Mega star Nicolas Cage is on the verge of bankruptcy. According to the Associated Press, he owes the IRS $6.3 million in back taxes from 2007. Additionally, he has a lien on his real estate holdings and is being sued by East West Bank for $2 million that he borrowed and hasn't paid back.
Nicolas Cage is one of the highest paid actor's in Hollywood and has purchased a significant amount of real estate in California, Nevada, Louisiana and Rhode Island, as well as in Europe which included his 11th century German castle called Schloss Neidstein. He has recently sold his castle and much of his property, most likely in an attempt to pay his IRS debt.
How does this happen to someone who has made over $40 million in the last year? He says it was the fault of his manager and financial advisors not taking care of his finances properly and is suing him for $20 million in damages. However, his manager states that it was Cage's excessive spending which includes but is not limited to $276,000 on a 67-million-year-old dinosaur skull, 15 palatial homes, yachts and several Rolls Royces.
"Levin repeatedly warned Coppola that he was living beyond his means, urged him to spend less, and warned him that financial disaster loomed if he continued to spend uncontrollably," Levin's filing said. Levin is also counter-suing for unpaid tax preparation of $167,000.
Although Cage has earned millions of dollars and has an entourage of managers and financial advisors helping him manage his cash flow and assets, the same rules apply for money management, and we can learn something from it.
I read a book when I was teenager that I consider required reading for everyone who has any money, whether you work or come into an inheritance, the same rules still apply. Maybe Nicolas Cage could have saved himself from financial doom if he took the time to learn some basic financial sense.
The Richest Man in Babylon is a series of financial parables. The setting is in ancient Babylon with a young man who used basic financial laws called the Seven Laws of Gold to accumulate a great deal of wealth. Here are some highlights of those financial laws.
Seven Laws of Gold
1) Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family- One-tenth of everything that comes into your hands should be put away in a savings. It could be a savings account or a piggy bank in your closet, it doesn't matter as long as one-tenth of everything you earn goes into savings. This is a goal everyone should have.
2) Control thy expenditures- Frivolous spending seems to be at the top of the list of many famous people who fall into financial ruin. Nicolas Cage's spending is at the root of his financial woes and his manager warned him that he could end up in bankruptcy if he didn't scale back his lavish lifestyle.
3) Gold laboreth diligently and contentedly for the wise owner- Your savings should be invested, not just sit in an account that doesn't earn any interest, or worse it shouldn't sit in a mattress. There are many high-yield savings accounts, bonds and CDs that are safe.
4) Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling. Keeping the principal safe in an investment is very important to guard from loss. Aside from stocks there are many investments that keeps the principal safe. Also, become an "informed" investor, always conduct due diligence, and most importantly have a financial advisor guide you through the treacherous terrain of financial investing.
5) Insure a future income. Investing in your retirement and your family's security after you pass. There are few ways to do this: Life insurance, Annuities with a death benefit, owning a business, or owning assets that can be liquidated if your beneficiaries choose.
6) Increase thy ability to earn. This law can take many forms: College education, continuing education in a related field, financial education, find a mentor. The key is to work hard, find opportunities in your career or investments and educate yourself, either one will give you greater opportunities and open many more doors.
And last but certainly not least:
7) Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment. If it's too good to be true then it most likely is. Anything that promises absurdly high returns, or if you feel pressured into investing into something, more than likely if you have conducted proper research then you will find out it is a scam.
Financial common sense is learned and becomes second nature when applied daily and to every aspect of your financial life. In addition, having a good financial advisor will also help you take your financial investments to the next level without risking your hard earned money.
Lisa Cintron is Executive Vice President at AdvisorWorld.com. is an interactive financial website that provides tools for consumers to "Ask the Experts" financial questions, research financial subjects and guides you through the process of finding a Financial Advisor, Annuity Rates or Life Insurance quotes.