> Posted by Jeffrey Riecke, Communications Specialist, CFI
You could say it’s like watching a car crash in slow motion. In certain industries, for talented individuals, as sure as their rise to fame is their fall to bankruptcy, or at least, to mountains of debt. Ever since the meteoric rise of certain cash-bloated industries, like sports, music, and film, to name a few, we’ve seen star after star go from being set-for-life to being, astonishingly, in dire financial straits.
The latest to be added to this list? Kayne West. The divisive hip-hop titan and cultural icon recently revealed that he is more than $50 million in personal debt*. The announcement came a few weeks ago at the tail end of the media circus surrounding his most recent album release. Along with the album, he launched a new fashion line – both to generally positive reviews. Arguably at the height of his talents in both pursuits, one wouldn’t suspect Mr. West of being in the red. In fact, in multiple songs on his new album his lyrics suggest otherwise: “10 thousand dollar fur for Nori, I just copped it, yo!” (Nori is his two-year-old daughter, who does indeed dress very well.) Kanye’s financial problems are so great that he took to Twitter to publicly ask Facebook CEO Mark Zuckerberg and Google Co-Founder Larry Page for money so that he could continue to make his art. It remains to be seen if the tech billionaires will bankroll the self-proclaimed “most important living artist”.
Along with Kanye, famous musicians who have gone bankrupt over the years include Marvin Gaye, David Crosby, Vanilla Ice, Jerry Lee Lewis, MC Hammer, and George Clinton. We could go on. Big names, which alludes to a big (and potentially growing) problem.
In the world of professional sports, financial stress is extremely well-documented. By the time they have been retired for two years, 78 percent of National Football League (American football) players have either gone bankrupt or are under financial stress. Within five years of retirement, roughly 60 percent of former National Basketball Association players are broke.
How does this happen? And should we care?
The entertainment and professional sports cultures in the United States embrace extreme purchasing – clothes (not just furs), jewelry, cars, houses, bling, bling, bling. But, typically, there’s more financial mismanagement going on here than just big buying. Many unfortunate superstars make millions when they’re young and haven’t had much experience managing wealth. The NBA increasingly recruits 19 year-olds with only one year of college. These unlucky kids are weighed down by six-plus figure incomes before they’ve even gotten through Accounting 101. If this sounds problematic to you, you’re not alone.
In the case of Kanye, we’re looking at questionable business investments. Kanye has reportedly devoted over $30 million to breaking into the fashion world. Clearly the man is passionate about clothes, and we acknowledge and respect that, but if you have to spend this kind of money, maybe your garments don’t cut the mustard. Maybe this is a case of Michael Jordan leaving basketball to play minor league baseball. Focusing on music would probably give us more and better Kanye West albums. (After all, who can honestly say that the most recent Kanye album is their favorite?)
As for the second question, yes, we at the Center for Financial Inclusion believe that the financial well-being of all individuals is important – even the 1 percent of the 1 percent. In part, if the mega-stars that some of us idolize don’t know how to effectively manage their money, we won’t have strong examples for society on how to live our financial lives. And, with shoddy financial footing, the chances that these gods walking among us won’t be able to flex their talents go through the roof. Our beloved megalomaniacs need better financial advice.
That’s why we at the CFI have decided to start a new financial education venture: Financial Education for the Really Successful (FERS). As a companion project to our financial capability-building paper launching in a few weeks, the CFI is embarking on a new one-on-one, outcome-based financial advice platform to help instill strong money management skills among society’s biggest change-makers.
The platform, a cross-stakeholder initiative, will pull from the foremost thinkers in pedagogy and behavioral economics to design hands-on curricula that link with the leading human-centered-designed products and services of top institutions and providers. The few selected to be program participants will receive the financial advice and skill-building they need from our pool of talented mentors on staff, working through their financial flows, debt status, and long-term goals. Immersive in structure, the project will hinge on meeting incremental behavior-change-based milestones. CFI staff will be happy to offer this service on-site at the residential compounds of the customers.
This isn’t about devoting our attentions to those in the limelight. It’s about giving those in the limelight a time-out before their green runs out. If we can turn our society’s stars into financial inclusion all-stars, the effects will “trickle down” and the inclusion movement will succeed. (Theory of change pending.) It is our aim for all project graduates to become CFI Financial Capability Fellows and carry on the project’s messages to their massive followings. Kanye West, for example, has about 21 million Twitter followers.
FERS has not yet landed its first participants. Kanye West, for one, has not responded to our direct messages on Twitter. If anyone knows how to get in contact with him, please do share this important information…
Happy April Fools Day! I hope you enjoyed reading this post as much as I enjoyed writing it. Satire aside, everyone’s financial well-being is of course important. The Center for Financial Services Innovation finds that many high-income people are not financially healthy. It should be noted that it appears Kanye West is doing more than fine financially. However, we believe the NFL and NBA figures are in fact true, which should prompt action from both leagues.
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