The new “Pirates of the Caribbean” movie installment just opened in the theaters, and let’s hope it generates a treasure chest of gold for star Johnny Depp. He needs it, or else he may be forced to walk the plank by lenders and tax collectors at the IRS.
How on earth did Depp get himself into this predicament?
Despite becoming one of the highest paid entertainers in the world, and earning $650 million or more over the last decade from a string of blockbuster movies, the actor’s financial missteps are rumored to have left him with empty pockets and $40 million in debt.
Depp’s reportedly extravagant spending habits – reaching $2 million per month – and excessive real estate purchases may have left him broke and indebted to the IRS.
Here’s 3 key takeaways you can gain from the star’s financial woes:
Regardless of how much you earn, you will get yourself in trouble if you spend more than you make. Depp’s former business managers, who are now involved with the star in a nasty lawsuit, detailed his $30,000 per month wine budget, $18 million yacht purchase, and $5 million spent on a cannon to blast the ashes of author Hunter Thompson over Aspen, Colorado. “We see it time and again with entertainers and athletes who just have an idea that because they are wealthy, they can essentially spend with no limits,” said Mark Hamrick, senior economic analyst for the personal finance company Bankrate. “There’s always an end to the money.”
Too much real estate is a recipe for disaster. Depp sunk a reported $75 million snapping up 14 high-end real estate properties around the globe, including a chateau in the south of France, islands in the Bahamas and a horse farm in Kentucky. He then dished out millions more staffing the properties, and racked up roughly $6-7 million per year in repairs, taxes and maintenance. Yet, Depp never managed to turn his real estate “expenses” into true “investments,” and failed to rent out his properties or use them in any way to generate income. He may have forgotten that, unlike stocks and bonds, real estate investments require constant additions of new money. And now that funds are tight, Depp is discovering all too late that real estate is an illiquid asset, and takes time to be converted to cash.
Messy personal lives cost money and goodwill. As many a top politician, athlete, or entertainer has discovered, when your personal life spirals out of control, your pocketbook usually suffers too. Depp managed to sink from media darling to public pariah thanks to a series of movie flops, Australian government allegations of dog smuggling in violation of health quarantines, and an expensive divorce (complete with domestic abuse charges). Remember that old-fashioned expression about “getting too big for your britches?” Depp’s financial quagmire is proof that letting too much money or too much success go to your head can cost you big-time.