- Date : 03/01/2018
- Read: 3 mins
Think outsourcing money management to an established firm has no risks? Think again.
No matter how much money you earn, if you do not manage it carefully, you could end up in a fix. Don’t believe it? Consider one of Hollywood’s acting greats- Johnny Depp. The famous star has found himself in financial doldrums for which he is blaming his financial managers; he even filed a lawsuit against them. The firm has filed a countersuit saying that the actor’s lavish lifestyle is the reason for his poor financial situation.
What was the lawsuit about?
The actor has claimed that the firm has cost him more than $40 million. He claims that because of mismanagement on the firm’s part, he has accumulated around $5.6 million in penalties for not filing his taxes on time. He also said that the firm paid itself $28 million without any written agreement. On the other hand, however, the firm claims that Depp spent a huge amount of money on 14 homes, a 150-foot yacht and other luxuries that caused the disruption of his finances.
The current fiasco that the actor finds himself in has some valuable lessons for all of us.
Don’t hesitate to ask questions
When you hire a money management firm to invest your money for the future, make sure you know exactly where your money is going and how the firm is helping you increase your wealth. Putting all your investments in their control without constantly checking on your finances could mean trouble in the long run. So, do not hesitate to ask about the investment destination, cash in hand, payment status etc. You can also ask for monthly reports to help you keep track of your own finances.
Do a background check on your money managers
You are putting your future in someone else’s hands, so you have the right to know as much as you can about the money management company you hire.
- Find out how you will be charged; ask how the company will manage your assets. Do not let any of your money be transferred directly into their account. Instead, maintain a brokerage account with the company, and make sure your money stays in your account.
- Find out the qualification of the person handling your account. Do not let an intern handle your assets. Ask for an experienced or suitably qualified person to manage your money.
- Opt for credentials such as Certified Financial Planner, Chartered Financial Analyst and Certified Public Accountant.
- It is also important that you are comfortable with the person you choose to manage your finances.
Stay informed about your cash flows and check your spending habits
Maintaining a healthy relationship with money entails being aware of your cash inflows and outflows, and curbing unnecessary spending if you find it to be a drain on your resources. To maintain consistent control over your finances, check your accounts regularly. It is also a good idea balance your income and expense reports. This will give you a fair idea of where your money is going, and can even help you plan your finances better.
Remember, you work hard for the money you make. Do not let it go down the drain by being careless with financial management.