Nicolas Cage is Yet Another Example

Here's a report on movie star Nicolas Cage selling a home "due to the difficult economic situation." As the piece points out, Cage makes $10 million a film. Isn't that enough to insulate him from "difficult economic situations?" Let's see, at that rate, I'd need to be in about 1/4 of one film to retire for good!

Then again, this piece says he makes $20 million or more per movie. If $10 million per film isn't enough to insulate him from "difficult economic situations", surely $20 million per film is, isn't it?

I went to Bankrate's celebrity spending power tracker and plugged in Nick's name. It lists him as making $20 million a year (one film or two, who knows?) and then lists the following information:

• For Cage, a house that would cost $275,000 for the rest of us, has less of an impact (because he earns so much) and it "seems to cost" him only $412.50. Imagine that -- getting a $275k home for just a bit over $400! I'd be RICH! Oh, that's the point -- he is rich (or at least earns a lot).

• For Cage, a car that would cost $20,000 for the rest of us "seems to cost" him only $30. No wonder stars have so many cars. I might too if they only cost me $30.

• For Cage, a laptop that would cost $2,000 for the rest of us "seems to cost" him only $3. I'll take 10.

• For Cage, a good meal that would cost $40 for the rest of us "seems to cost" him only 6 cents.

Let's go back to the original article and do the math. He's trying to sell his home for $2.3 million. That's big money for us, but for him it's worth only a few months of pay. And if you reverse the Bankrate math above, him selling a place for $2.3 million is like you and I selling something for $3,450. In other words, he's in such financial trouble that he has to sell some of his "better furniture", a used car in "decent" shape, or a set of collectibles he's been gathering for the past 15 to 20 years. At least those are the sorts of things you and I would have to sell if we needed $3,450. In other words, he's desperate for money -- he needs it because he's in tough financial shape.

Ok, so what's the point? This is simply another real-life example that it's not what you make, it's what you spend. Make $20 million a year and spend $19 million and you're doing pretty well. Make $20 million a year and spend $21 million and after a few years, you're in really, really bad shape. That's why I say that spending less than you earn is my best piece of financial advice and the key to becoming rich. You may earn a ba-zillion dollars a year, but if you spend more than that, you're going backwards financially. Step 1 in solid financial management is to make sure you can control yourself enough so that you spend less than you earn.

Of course, you can REALLY super-charge your net worth if you start to earn more and more while keeping your lifestyle/spending in check (or even lowering it.) :-)

Unfortunately, Cage isn't alone. There are many, many, many people who simply can't control their spending and, as a result, find themselves in financial trouble.

Comments

[My Life ROI]

Good reverse analysis in re: to "he's in such financial trouble that he has to sell some of his "better furniture", a used car in "decent" shape, or a set of collectibles he's been gathering for the past 15 to 20 years"

Made me laugh... but that is pretty sad that these stars fumble such benefits.

[Eugene Krabs]

Thanks for sharing that interesting perspective. I remember the news coverage on Bill Gate's new house that they were building. At the time, it was suppose to be one of the most expensive houses in the area, and costed... I think $40 million dollars to build. However, when compared to his net worth at the time, it was only about "$100" to him. Quite an interesting perspective indeed!

[Strick]

Isn't selling off your 15th (and barely used) house in a time of recession (and I assume lower box office receipts) a sign of someone making wise financial choices (or did I miss a bankruptcy filing in there)?

[cb]

I bet he's doing plenty fine and is probably just cutting back his lifestyle after finding out it's a lot of work to take care of 5 houses.

[Sarah]

That's what I was thinking--maybe he's just responding sensibly to this environment (and the fact that he must be getting ready to age out of the sweet spot for movie work).

[Richard]

Ya know, the problem I have with statements of "Spend Less Than You Earn" is that most people don't realize that they are doing it. Every PF blog I read has this same line about earning $10 and spending $11, but even some of the worst offenders aren't going figure it out. In this post above, you're talking about Nick Cage violating this 'simple principal', but I think what he's more likely guilty of is not proper planning ahead. I'm sure during his "Rock" & "National Treasure 1" days, he was raking in the dough and could very easily afford his cars, house payment, etc. With the changing economy and crappier movies (NT2 wasn't nearly as good) maybe its just now that he can't afford it.

Now you could argue that he "never could afford it in the first place" which I won't disagree with, but people reading "Spend Less Than You Earn" probably won't make the correlation between the two.

[Broke Wall Streeter]

Hey, don't forget he doesn't get to pocket all of the $20 million per film. The IRS takes half, agents and lawyers take 10%, personal assistants and security detail, airfare to bring his wife on set and back every weekend, etc. Do you know how much insurance is on a Ferrari?!?! All problems I'd like to have, but he probably doesn't even manage his own finances and gets an allowance from his financial advisors. He's away from home for 2/3 of the year filming all over the world. Let's leave him alone. His financial advisors probably screwed the pooch and told him he has to cut back. Look at Kevin Bacon and Kyra Sedgwick who got screwed by Madoff. The poor girl's doing Tropicana juice commercials (for several million $, but still). Oh, the horror. Let's focus on the guys using our tax dollars to drive their Ferraris.

[RAJEEV KUMAR SINGH]

Grea post.. it goes to reinforce the golden rule of "Spending less than what one earns" . EVen stars making millions are not spared if they dont respect this rule as is explained in the post.

[Coupon Trunk]

One of the problems I see is that many people and probably Nick Cage as well, are always counting on future earnings to maintain a certain lifestyle. His movie Bangkok Dangerous was a complete bust, and even if he made $10 or $20 million for that movie. His previous earnings are no indication of his future earnings, and he's probably just getting rid of some dead weight. I'm sure he has some financial advisers telling him that he needs to cut his expenditures.