Celebrities have the potential to earn an absurd amount of money for their contributions in film, music, art, sports, business, and other areas. In a single year, the top earning celebrities can earn hundreds of millions of dollars – and over the course of their career, they can easily accumulate billions. Even minor celebrities make hundreds of thousands to millions of dollars every year, eventually accumulating millions of dollars of net worth – assuming they’re able to manage that wealth successfully.
So how exactly do celebrities manage their wealth? What do they do with all that money? And how do they make sure they retain that wealth indefinitely?
All Celebrities Are Different
First, it’s important to realize that all celebrities are different.
Some top earners are extremely cautious with their money, doing everything possible to continue living a frugal lifestyle so they never have to worry about running out of cash. Even if their career comes to a screeching halt, they and their descendants can live comfortably indefinitely.
Other top earners are much more reckless, spending their money frivolously without much forethought. These celebrities have no wealth management strategy whatsoever, instead trusting that the money’s going to keep coming and living under the delusion that they have access to infinite funds.
Between these polar ends of the spectrum are most celebrities, who may spend recklessly from time to time, but who also prioritize at least some long-term wealth management strategies.
Dedicated Wealth/Financial Managers
Most people earning millions of dollars can afford to hire dedicated wealth managers or financial managers, who can help them understand the financial context of their income and purchases. Even if the celebrity in question has robust knowledge of personal finances and investments, they may not have the time or energy to make all their own financial decisions. Accordingly, it’s usually a wealth manager who makes recommendations for wealth management strategies.
Specific Wealth Management Strategies
So what are those wealth management strategies that financial advisors recommend?
It’s going to look different in every situation, but these are some of the most common tactics used:
- Basic budgeting. Basic budgeting is extremely important if you have a tendency to live frivolously. Making $10 million from a couple of film appearances may seem like enough money to make you set for life, but it’s not going to last you that long if you spend $50,000 a month on wine alone. Sometimes, the extravagant lifestyles of celebrities need to be reined in.
- Property management/real estate. Another common strategy is managing real estate. Real estate, by itself, is usually a good investment, and if you rent out your properties to paying tenants, you can make even more money. Most celebrities don’t have the time or interest in managing their properties actively, so they hire property managers to take care of things.
- Private equity. Some celebrities choose to invest in businesses and startups in the private sector. They may fund a promising tech startup, buy a bar, or get involved in managing a restaurant chain. Private equity opportunities can be a great way to make money, and it’s also a way to stay active in the business community.
- Mutual funds and stocks. Celebrities searching for a simpler option may choose to invest in mutual funds and stocks. These assets have historically performed well, and as long as you diversify your investments, you shouldn’t have to worry about catastrophic losses.
- Art. Many “normal” people invest in mutual funds and stocks, but few invest in artwork. Some celebrities love purchasing and hoarding artwork to function as stores of value; they also have the added bonus of fancifully decorating a lavish home.
- Bonds and safe havens. For more risk averse celebrities, it’s important to find safe havens. Bonds have historically been very stable and predictable, and precious metals and other commodities can protect your money even during economic downturns.
- Annuities. Annuities are safe, consistent products that require a significant upfront investment, but pay you out in regular installments over time.
- Portfolio diversification. Portfolio diversification is as important for celebrities as it is to the rest of us. Financially responsible celebrities never dump all their money into one asset class or investment type; they shield themselves from risk by investing in many different areas.
- Liquid savings. Of course, it’s also important to have some cash on hand. Most celebrities want at least some free access to their money whenever they need it, and they want plenty of capital to make investment decisions whenever the time is right.
Celebrities manage their wealth in all kinds of ways, and some don’t manage it at all. If you ever find yourself in the position of earning millions of dollars, consider using some of these strategic maneuvers to preserve your wealth indefinitely.