Budgeting With Cardi B

I don’t really know Cardi B’s music very well because I’ve more or less given up on the new rap music scene (I’m entering the get off my lawn stage of music preferences) but I do see her Instagram videos pop up on my Twitter stream from time-to-time.

If nothing else, she’s direct in her messaging and says exactly what’s on her mind. Here’s Cardi’s take on taxes, spending and budgeting (skip the video if you’re easily offended by swearing):

So she’s spending somewhere in the range of $250-$300k a month!

Obviously, almost anyone would gladly trade places with her in a heartbeat and be more than willing to pay a 45% tax rate to make the kind of money she’s making.

Business Insider pegs her net worth at around $8 million but I’m guessing the amount of money she’s making has risen exponentially over the past few years given her meteoric rise to fame since first appearing on some VH1 show (the Pepsi Super Bowl commercial probably helps too).

It’s easy to mock celebrities who get themselves into this situation and bemoan the fact that we’re not blessed with one-percenter problems like this. But how many of us get a raise or a promotion and immediately adjust our standard of living to the upside?

Spending rarely stays constant when our income changes.

At a bare minimum, at least she knows her monthly outlay of cash.1 How many people up and down the income spectrum truly know how much they spend each month or track where it’s going?

She’s not the first celebrity to develop expensive spending habits nor will she be the last.

Nicolas Cage was once worth an estimated $150 million. He blew through almost 85% of that money buying dozens of houses, a private island, a $150k pet octopus, and a 70 million-year-old dinosaur skull (which had to be returned to the Mongolian government because it was a stolen artifact).

He was forced to foreclose on many of the properties after taking on too much debt and owed millions in back taxes to the IRS. Cage has since been taking seemingly every movie role to come his way to make up for it.

MC Hammer was the cautionary spending tale from the 1990s. His estimated net worth was $33 million in the early-1990s. By the middle of the decade, he was $13 million in the hole. It didn’t help that he bought a $30 million mansion and had more than 200 people working for him at a run rate of almost $1 million a month.

Kanye West was rumored to be in debt to the tune of $53 million a few years ago before the Fed Kardashians bailed him out (the Yeezy money had already been made, etc., etc.).

Rihanna had $11 million in 2009 before buying a $7.5 million mansion in Beverly Hills. The home had all sorts of problems including mold and water damage and she was forced to unload it at a $2 million loss. If you do the math on this transaction you could see why she was a little worried about her finances after the fact.

Combined with a healthy spending rate, she was basically broke.2

Her lawsuit read:

As a result of Defendants’ acts and omissions, [Robyn Rihanna] Fenty purchased a home, even though it was inadvisable to do so and competent business managers would have advised her not to do so.

Maybe she should have had better financial counsel (she ended up winning $10 million from her business manager in the lawsuit) but basic accounting would tell you she was going overboard.

I’m not going to take the bait here and use the Biggie lyrics, but this is a good reminder that more money doesn’t always solve money problems. It’s hard to believe but even when you have millions of dollars you still have to pay attention to your level of spending.

Understanding your spending habits is for people of all wealth and income levels. It doesn’t matter how much money you make if you spend every last cent that’s coming in.

I also like to think about earning and spending in terms of stress-adjusted income. If your level of stress rises in line with your level of income, it doesn’t matter how much stuff you can buy. If you’re still worried about money all the time that’s not a true sign of wealth.

If you make $60k a year but are able to live comfortably on $50k, you’re getting ahead financially. If you make $10 million a year but spend $10.1 million, you’re falling behind financially.

Thank you Captain Obvious.

This may be obvious on paper but for many, it’s difficult to translate from theory into reality.

Spending a lot of money does not make you wealthy. Spending less than you earn makes you wealthy.

Further Reading:
The 3 Levels of Wealth

1For her sake I hope she continues to be a big earner with a $3-$4 million annual spend rate.

2Rihanna is now worth an estimated $260 million so she obviously righted the financial ship.

 
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