What Celebrity Fortunes Can Teach Us About FIRE

If you saw the press around how Jay-Z is hip hop’s first billionaire, you might have glossed over it for the entertainment value but missed how important it is to your FIRE plans.

Sure, Jay-Z and other celebrities have outsized paychecks that bear little resemblance to the money you and I have to work with. However, the way he and other astute celebrities have managed their career, time and money yields important lessons.

Be an owner, like Jay-Z

Jay-Z isn’t just the worker; he’s the owner — a musician who owns his catalog, a brand representative who owns stakes in the brands. He negotiated the return of his publishing rights from the record label. He has invested in companies. He owns real estate.

Jay-Z owns a portfolio of diversified assets (even an art collection), so he’s well buffered to withstand the volatility of any specific market and the fleeting nature of celebrity.

Be resilient, like Taylor Hicks

Speaking of the fleeting nature of celebrity, Hicks is a former winner of American Idol and was dropped by his label after his first album.

He went on tour with the musical theatre production of Grease and sold his own albums at each stop, making several million dollars in the process.

Be nimble, like Ashton Kutcher

Nowadays it’s commonplace for celebrities to be omnipresent and influential on social media but that wasn’t always the case. Ashton Kutcher was early to digital, and this helped him get in early with tech company investments that paid off big.

The Hicks and Kutcher examples are from one of the most fun business books I have ever read,  Celebrity Inc by Jo Piazza. I had reviewed this book for my Forbes column and revisited that post after seeing the Jay-Z news.

It is amazing how many of the celebrity relationship statuses and reputations are fundamentally changed less than nine years later. It’s a powerful reminder that celebrity or renown in your field are not enough to ensure lasting success.

Have multiple sources of income

What Jay-Z and the celebrities covered by Piazza’s book (who managed to attain long-term success) all have in common are multiple sources of income. This is a key trait of the wealthy, not just celebrities. Wealthy people on average have five or more sources of income.

Looking at our own household, we currently have six income sources:

1. Business income
2. Rental income from real estate
3. Interest income from investments
4. Dividend income from stocks
5. Capital gains from stock and real estate appreciation
6. Royalties

Several of these income streams are negligible right now but they are growing. Dividends and capital gains are being reinvested, but we could tap these in a pinch. Or we could borrow against assets that have appreciated if needed.

At least we have options and can choose based on where we see the most opportunity, where our interests take us and what the external markets support.

Avoid a single point of failure

Nathan Latke, serial entrepreneur and author of, How To Be A Capitalist Without Any Capital also supports the importance of multiple income sources to avoid the “single point of failure” problem. If one source goes dry, you have one or ideally several more.

If you have no income outside of your job, your employer represents a single point of failure. The Fed recently cut interest rates, in part to help goose up more jobs. You don’t want to be overly-reliant on any one job heading into a recession.

Of course, Jay-Z won’t have a problem in the next recession – not just because he has enough money to never have to work another day in his life. Jay-Z has enough other income sources and enough diversification that he can ride out a bad market.

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How about you? How many sources of income do you have? How diversified are you?