Celebrity Money Mistakes

Mistake No. 1:
Falling for an Investment Scam

Kevin Bacon and his wife, Kyra Sedgwick, lost big in the Bernie Madoff scandal. While a representative for the couple confirms only that they had investments with Madoff, New York magazine reports that actors "lost everything except for their checking accounts and the land they own." Other big time celebrities caught in Madoff's massive $50 billion Ponzi scheme include a charity run by famed director Steven Speilberg and Dreamworks CEO Jeffrey Katzenberg. No word yet on just how much they've lost.
Next: We Want Pre-Nup!

Mistake No. 2:
Not Signing a Pre-Nup

Ouch! Madonna is known for her tight control over her image and family, so how did the Material Girl end up putting her $500 million fortune at risk? Madonna's divorce from Guy Ritchie ended in one of the largest divorce settlements in history. Madonna will reportedly pay her ex a whopping $75 million! Look, you don't need to be filthy rich to need a pre-nup. If you bring assets to your partnership that you want to be sure you keep 100% of if things don't work out, it's essential you work out a pre-nuptial agreement before you are married.
Next: Who Stole My Identity?

Mistake No. 3:
Falling Victim to ID Theft

You might not know his face, but we bet you know his voice! 'Price is Right' announcer Rich Fields is the latest in a long line of celebrity identity theft victims. Fields got taken for $71,000 and has a long road ahead of him as he tries to clean up this mess. Other famous identity theft victims include Oprah and Tiger Woods. ID theft is one of the fastest growing crimes in the country'and it's not just celebrities who are at risk. There are eight million victims of ID theft each year.
Next: You Want How Much?

Mistake No. 4:
Pricing Your Home Too High

Two out of three homeowners think their home value has increased over the last year, when in reality, 77% of all homes have lost value. Stars are no different. That's why we've seen celebrity after celebrity forced to drop the price of their homes because they won't sell. The Donald had to slash $25 million off the price on his famed Palm Beach before it would sell! Others forced to slash the price of their home include Sharon Stone, Cher and basketball star Allen Iverson. Best tip for this market: Price it to sell or or be prepared to sit on it for a long time.
Next: The (Family) Ties That Bind

Mistake No. 5:
Loaning to Family and Friends

Academy Award winner Richard Dreyfuss learned the hard way that loaning money to family and friends often leads to headache or heartache. Dreyfuss sued his father and uncle over an $870,000 loan he gave them. Dreyfuss claims he never got back his money or the interest due. Think long and hard before you follow in his footsteps. If you do decide to loan someone close to you money, make sure you put the terms of the agreement in writing so there aren't any surprises later. Our No. 1 rule is to create an enforceable loan note.
Next: The Tax Man Cometh

Mistake No. 6:
Trouble With the Tax Man

Actor Nicolas Cage recently settled with the IRS, agreeing to pay approx. $600K in back taxes plus interest and penalties. Before Cage, it was actor Wesley Snipes who was convicted of failing to file a tax return and was sentenced to the three years in prison for failing to pay $15 million in taxes. Take advantage of all the perfectly legal ways to make sure you pay your share and not one penny more. But don't think you can pull one over on the IRS, or you might find yourself in a jail cell conversation with Survivor winner Richard Hatch (who's doing 4 years for failing to pay taxes on his $1M winnings!).
Next: Going ... Going .. Bankrupt!

Mistake No. 7:
Going Bankrupt

We know, we know, cry us a river, right? It's hard to muster much sympathy for celebrities who made a fortune and squandered it all, but the list of celebs forced to declare bankruptcy is surprisingly long. Threatening to join the club is Hugh Hefner and his bunnies. That's right, Hef has been told to seriously tighten his belt before he loses it all. And hip-hop mogul Suge Knight is already a card carrying member. His Malibu mansion was recently sold as part of a bankruptcy settlement.
Next: Where There's a Will ...

Mistake No. 8:
Not Updating Your Will

Deceased Actor Heath Ledger is still getting rave reviews and award nominations for his fabulous turn as the Joker. But his tragic death was no laughing matter. Nor was the fact that neither his girlfriend, Michelle Williams, or their daughter, Matilda, was included in his will. That wasn't a slight ... Ledger just hadn't updated his will since 2003, well before either was in his life. Luckily for Matilda, Ledger's family did the right thing and turned over the entire estate to his daughter. Be sure you update your will to address any major life event, such as marriage, divorce or births.
Next: Time to Pack

Mistake No. 9:
Losing Home to Foreclosure

Former Johnny Carson sidekick Ed McMahon had a fascinating 2008. First, he faced the nightmare of nearly losing his home to foreclosure after falling $664,000 behind in payments on his Beverly Hills mansion. Lucky for McMahon that real estate mogul Donald Trump is a fan and has offered to buy McMahon's home and lease it back to him. Other celebs to lose their homes recently include queen of soul Aretha Franklin, rapper DMX and disgraced baseballer Jose Canseco, who simply abandoned his $2.8 million pad. (See a gallery of recent celebrity foreclosures here).
Next: Spending It All

Mistake No. 10:
Spending It All

Pop sensation Britney Spears is trying to recover from a disastrous 2008. Her hair has grown back, but her finances are still shaky. According to court papers from her 2008 custody battle, Britney wasn't saving one penny of her $737,000 monthly income. She spent zero on education, savings or investing! ZERO. Brit's been put on a strict budget by her dad, who was just granted an extension in his control over her financial affairs.
Next: More From the Dolans

More from the Dolans:

We can't help you make the cover of the latest gossip rag, but we can help make sure you don't repeat any of these celebrity money mistakes. Visit us at Dolans.com for proven tips that will help you get out of debt, save more money and rebuild your nest egg.

Start Here:
' Ways to Save on Necessities
' Drowning in Debt? Here's Help

More from the Dolans:

We can't help you make the cover of the latest gossip rag, but we can help make sure you don't repeat any of these celebrity money mistakes. Visit us at Dolans.com for proven tips that will help you get out of debt, save more money and rebuild your nest egg.

Start Here:
' Ways to Save on Necessities
' Drowning in Debt? Here's Help