How to avoid poverty after making $650M

The 1980s television series

“21 Jump Street” launched Johnny Depp’s acting career. “Edward Scissorhands” made him a movie star. But it was Disney’s “Pirates of the Caribbean” movies that made him rich.

The original film and its sequels grossed about $4.5 billion in ticket sales. That franchise, along with other films, earned Depp an estimated $650 million, according to Rolling Stone.

If we are to believe the reports, most of it is gone.

Thus, we have yet another cautionary tale of what happens when too much money meets too little financial savvy. Lottery winners, pop performers, sports stars and other recipients of sudden wealth often fall into the same trap. They react emotionally to the windfall; they don’t think longterm or strategically. These sorts of unforced errors leave a permanent mark on their emotional and financial well-being.

Depp is now suing his business manager and his firm for negligence, breach of fiduciary duty and fraud. Here are some rules that can help any recipient of new wealth avoid going broke:

Have a plan

Anyone who comes into a pile of cash must think about ensuring it lasts a lifetime. Note this isn’t just about actors or athletes, but the 60 million people who stand on the precipice of a $30 trillion intergenerational wealth transfer. The beneficiaries and heirs of all that wealth need a plan to manage that money.

Delegate, but be involved

Be aware of the details of your own finances. The most successful athletes and musi- cians have business managers who might handle the dayto-day chores while they are on the road working, but they must understand their own earnings, spending and investments. It’s your money, it’s your responsibility — if you do not know the specifics, then you are just asking for trouble. If Michael Jordan and Bruce Springsteen can find time to be intimately involved in their personal finances, you can too.

Understand career cycle

We all begin as newbies, grow into our peak earnings years, then scale back the workload or retire. Those phases cover most of us. The first decade or so is when we become better, smarter, more skilled; the second phase is when we capitalize on those skills; the last is when we kick back. The mistake of assuming peak earning years will last much longer than they do is surprisingly common.

Avoid debt

Living within your means should get easier as earnings rise. Instead, people find more expensive ways to fritter away their cash. Access to credit all too often is the enabler of profligacy that can easily outstrip even multimillion-dollar salaries. It is one thing to use credit modestly to buy a home or manage cash flows, especially for someone who receives an annual bonus that makes up a substantial portion of total compensation; it is another thing to use debt to finance an ongoing lifestyle.

Keep investments simple

This is especially important for anyone who is on the road or travels a lot for work. Best to keep it simple, hold down costs and limit tax liability. A portfolio of 60 percent stocks and 40 percent bonds will grow over the years with a minimum of volatility and headaches. Find an experienced pro to help manage this.