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June 26, 2009

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Maybe it wasn't he "spent" more than he made... couldn't it be what ruined his finances were all the lawsuits?

Christy --

I'm sure that was part of it, but there's no doubt that he spent lavishly.

He spent lavishly, that's for sure. However, the legal fees poor choices, actions, and the resulting lawsuits are ultimately what lead to the debt. If he didn't have these issues, there would be no debt - and still a lot of assets.

Michael Joseph Jackson died less than twenty-four hours ago. Why not pass, at this time (at least), on self-serving judgments about his choices, financial or otherwise?

Bobbi --

In case you haven't noticed, the whole world is talking about him -- it's news now, not in a day or so. In addition, IMO, what I wrote was a pretty honest and fair piece.

I am so behind you! I don't understand how some people that can make money spend it like they do but I guess it doesn't matter if you are a millionaire or poor. If one spends more than he makes then its useless to even have money. I am grateful this article.


Anyway have a great weekend everyone!

John

In reponse to Bobbi - I think it's only fair to point out things like this, especially on a money blog. While his death is tragic, it doesn't gloss over some of his actions in life.

I think that his debt is due to just more than lawsuits. As an example, the guy built his own amusement park. That can't be cheap to build or maintain.

It's naive to try to blame it on lawsuits and legal fees, and make it seem like it's not his fault that he was so far in debt.

I think it is easy to say that he spent it all PLUS $400 million. It is obvious that he spent more than he earned, . I wonder if it would be useful to explore the subject a little bit deeper than that. Such as the psychological underpinnings of these actions. MJ was a huge superstar and in the public eye for pretty much his entire life. How did that affect him mentally? I'd be interested to know more on this.

He spent money on a very large scale as compared to the average person. But to explore the reasons behind this mentally might well benefit everyone who falls into the 'spend more' category.

'How could someone with so much spend it all PLUS another $400 million?'

I have to disagree FMF. The answer to this question is actually not so easy to answer.

Maybe I should have read the reference article: "One forensic accountant testified that the singer had an "ongoing cash crisis" and was spending $20 million to $30 million more per year than he earned."

I had the same thought regarding Ed McMahon a couple days ago while reading an article about his passing. Certainly he didn't have the income generating power of The King of Pop, but the man had an income that most people would envy. Yet very recently he was not able to pay his mortgage. FMF is so right about spending less than you make.

An addendum to Christy's point - I read (I think on Daily Mail, so take it with a grain of salt) that he still earned $19 million a year, even without releasing music or touring in such a long time.

@Christy - What I find sad about his spending is the fact that it was possible for him to spend $20-30 million a year more than he earned. Where did the money come from? I don't get it. Kind of ties into our government spending right now as well. Where does the money come from? Let's break it down. When you were in school, the teacher told you if Johnny has $12 and spends $2, he has $10 left. But if Johnny spends $14, where the heck did the other $2 come from. Possibly a neighbor? Ok, now switching back to reality, the economy is in recession, people are losing their jobs, people live beyond their means, and people just don't have money. How the heck is Johnny gonna pay back his neighbor? He's not! Here's an idea, stop loaning out money to anybody and everybody and stop spending more than you earn. Money seems to have become an endless entity yet no one knows why the economy isn't bouncing back. We (including the government) are still doing the same things that put us in the mess AND MORE!

Bobbie,

With life events, such as death, there are always lessons to be learned.

Many people often think that if they just made a bit more, they wouldn't have debt/money issues. However, many people often seem to adjust upward as the income rises and still have the same problem. I, myself, am guilty of this through a good portion of my life.

People who get an unbelievable amount of windfall money are too overwhelmed by it. They make poor choices and end up being homeless after wining $250 million Powerball and other ish. And pop-stars have vultures hovering over them to to squeeze all the money out. Sports dude have manager who get hefty cut for doing nothing or doing something I'd do for $50/hr.

People who earn their money the hard way, value it. People who get it easily, don't. We can call MJ a hard worker. But when it comes down to it, the day laborer who hauls dirt all day to earn $100 is always going to be the one who worked harder than someone who had to fly from LA to NY in Business class in a day to give an interview in Jay Leno.

To paraphrase Memphis Slim.

No matter what you're worth, you still go back to Mother Earth...

Great article. Spend less than you earn is probably one of the best mantras out there. I had to relearn it a while back.

Yes, I wonder who's his lenders and what's the interest rates are on that 400 million debt. The lenders are probably freaking out now. So, will MJ's children inherit his debt? The lenders probably will recover their money (from his music royalties, etc.) but it's going to take a while.

I really think it was all the trouble he got into, not his spending habits.

Read the article - he habitually spent millions more than he earned ($20M to $30M more per year, at least in the last decade).

It's hard to see how this might be possible, until you see that he leveraged up every asset he had, then sold them off in chunks to live off the proceeds, then relied on substantial gifts from wealthy benefactors/fans!

It's pathetically sad in my opinion. Anybody who spends double what they earn on an ongoing basis has problems, but when you earn $20M in a slow year just from royalties, it's disgustingly irresponsible.

But then, so is molesting children.

I'll never forget watching that show about him on VH-1 several years ago--the one in which the journalist and camera crew accompanied him for several months and gained an unprecedented insight into MJ's weird, weird world. Two scenes that really stood out for me were the one in which he had an entire floor of a hotel to himself (and then had mannequins in several rooms that he would talk to), and the other where he visited an art gallery and just started pointing at things as he walked by--without even pausing to really look at anything--saying, "I'll take that. I want this. I'll take that."

The man's life was so bizarre in so many ways, but just his finances alone were out of control. He would have needed to release a "Thriller"-like record every other year to keep up this lifestyle!

I think that debating between whether it was his spending or his legal trouble is a moot point - it was all a result of his lifestyle and his choices. You cannot say he was the victim (except possibly in 93, which I'll explain below).

Most of the lawsuits against him were for concerts and promotional deals that fell through. The reason why they fell through? He made deliberate choices that resulted in him not fulfilling contracts and agreements he had made.

As far as I know, there was only one lawsuit against him for child molestation back in 93. The father initially sued for $20 million, and it was settled out of court. There was also a crimal trial, but it's important to note that civil suits and criminal trials are completely separate.

He probably did spend a lot on legal fees over the years, but again, it was a result of his choices and his actions.

Just for the sake of this discussion, I'll assume he never did anything wrong with children. Even if that's the case, after the civil lawsuit and criminal trial in 93, he should have taken steps to avoid being put in a similar position again. An example of a change he could have made? Not allowing children to sleep in the same bed with him.

Fool me once, shame on you. Fool me twice, shame on me. He put himself in the exact same situation which enabled the criminal trial of 2005 to occur. I could be wrong, but I don't recall hearing about a civil suit in 2005 - only a criminal trial.

You can't just say that he was the victim of frivilous lawsuits, and pass that off. They were all (with the possible exception for the events of 1993) a direct result of his actions.

Quincy Jones said in an interview that when Jackson rocketed to mega stardom after "Thriller" there were only two directions he could go. He could feel he deserved all the money and attention or he could feel unworthy of it. He worried Jackson would not be able to "keep his feet on the ground". At one point "Thriller" was selling 1.5 million copies a week.

It's far too simplistic to simply say he spent more than he earned and he should have known better. It's pretty clear to me the media machine and his own demons ate him up. Nobody was bigger than Michael Jackson at his peak. Not Michael Jordan, not Madonna, Elvis or Sinatra. Not even Muhammad Ali.

It might be wise to remember the old saying about walking in another man's shoes.

Also, just because I think it's related to this debate, here's a statement from his former manager:


“As someone who served as Michael Jackson’s publicist during the 1st child molestation incident, I must confess I am not surprised by today’s tragic news.

Michael has been on an impossibly difficult and often self-destructive journey for years. His talent was unquestionable but so too was his discomfort with the norms of the world.

A human simply can not withstand this level of prolonged stress.”

Michael Levine, former publicist to Michael Jackson.


I wanted to post it because it shows that his lifestyle was incredibly self-destructive. His obsession with children - even if innocent - is a great example of this.


FMF - great discussion starter. It's nice to see some off-topic (but still money related) posts like this (or your sports posts) on here

While HE may have been tortured by other stressors, I don't think you can really criticize his money management at this point.

He spent like a lunatic, bought everything he possibly wanted in his lifetime, and then died. It doesn't matter to him anymore how much debt he's in. He's gone.

I hope I perish with a $400 million unpaid loan.

I like what Dar and David said.

Also, for reference he was directly getting $2 for every Thriller album sold. That was $3M per week at one point. Not making excuses, he was simply out of control and lived a life that none of us could ever understand.

@Mike B.: [[It doesn't matter to him anymore how much debt he's in. He's gone. I hope I perish with a $400 million unpaid loan.]]

Not if you believe in Afterlife (and Afterlife is indeed true,) then you're screwed.

well he's deceased now, not really his problem, the debt.

he didn't make wise choices with money, but he was still the best there was, musically.

What's really pathetic, beyond MJ's normal life, is that he left three children behind--and despite having a world-famous pop star father with an infamous ranch/zoo/amusement park, they will likely get ZERO inheritance because of his massive debt.


I'd be interested in hearing anyone's input or experience in a matter like that. If MJ's estate owes $400 million, how will they settle that with the creditors? Auction everything off?


I'm especially curious about the situation with MJ's royalties--would a third party be designated to collect the royalties and divvy the revenue stream among the creditors until everything is paid off? Will his kids ever get a part of that before all his debts are settled?


Life insurance is another thing I'm curious about in this situation. This doesn't appear to be suicide, but an accident--or perhaps even manslaughter if the doctor is found liable? Maybe malpractice insurance applies here too? Would insurance payments to survivors be considered part of the estate and subject to a lien?

I guess another example you could learn from this is how important it is to make sure your affairs in order. In spite of the debt, I'm sure MJ held tons of assets (if nothing else, the rights to his music...not sure if he holds the right to the Beatles anymore).

It would be a shame if his kids weren't able to enjoy some of the fruits of his labors. With that much debt, it seems like a real possibility. I would be interested to hear how his creditors will settle with his estate.

I find it interesting that you never hear about classical musicians being in debt (or in trouble with the law or in trouble with drugs), only the pop ones. Are the former more intelligent or are they not considered newsworthy? Or maybe it takes more work to make it in classical music, so money don't come as easy to them.

"he didn't make wise choices with money, but he was still the best there was, musically."
Among pop musicians.

"he was still the best there was, musically"
As with all popular cultural icons, his legacy will fade with the passage of time. Glenn Miller, anyone?

Elvis Presley's estate did not include massive debt, his survivors are well provided for and continue to receive royalty payments. The Jackson family, however, will not see much of the post-mortum income from his legacy. $400 million is the current debt total but will continue to accrue interest and penalties as time passes. The current $20 million per year from royality payments will not pay off that sum any time soon. MJ's estate auction should be interesting.

does anybody really care.he lived better then 95% of the world,oh well life goes on for the rest of us poor micheal or poor us

Does anybody know what Michael Jackson's final net worth was? Understand the debt for the loan but I thought he still had the rights to the Beatles with a $200 million loan on that as well as his lifetime royalties.

If both of these are sold wouldn't his estate have a positive net worth?

-Mike

No mood to touch the financial issues. RIP MJ.

Given the early indications of a possible battle over his estate, I'm not so sure he was broke. If the assets are really worth the latest $600 million estimate on paper, I'd say his $200 million positive net worth beats me by a little.

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