Everyone faces trials in life. I can only imagine what it is like to face personal troubles when those issues are out in the public domain. For celebrities, though, this is a regular occupational hazard necessary to feed their celebrity status. As the Hollywood saying goes, all publicity is good publicity. Trying telling that to Kanye West (@KanyeWest), who recently announced he is 53 million dollars in debt.
While Kanye’s public acknowledgement of his staggering personal debt is shocking, due to the magnitude of the debt and personal nature of the disclosure, it does provide a moment for reflection. Namely, that the basic laws of personal finance are universal and cannot be escaped.
Here are three universal laws to keep your eye on:
Debt Takes No Prisoners
The laws of finance apply to us all. When you spend more than you make, either in your personal life or in business, you create the appetite for debt. When you begin developing the notion that you need to expand your business in order to scale or expand your personal assets, debt is almost always a well to draw from. However, debt is a simple beast that must be approached with caution because it is constant in its demands. It must be repaid (Here is classic advice on how to pay off debt).
Make More Or Spend Less
The elegance of personal finance lies in simplicity. In order for someone to overcome debt there are generally only two options: increase your earning or decrease your expenses. Inheritance is nice, but don’t count on it.
For those living a life of extravagance and living beyond their means, cutting costs can be a major, but necessary, adjustment. Selling assets to pay for outstanding debts can prove to be a quick way to recoup the necessary cash to eradicate debt. While lifestyle adjustment may be an extremely effective way to re-balance one’s financial position, it often requires behavioral changes that take time to become routine.
If cutting expenses doesn’t seem to be the right fit, you can always try increasing your earnings to pay for debts. This can take the form of a second job or freelance work. For Kanye West, this may involve closing larger deals and exploring new avenues for earnings.
Debt Is Relative
If 53 Million dollars sounds like an incredible amount of money, then you would be right. To the average person, who has never dealt in million dollar amounts, this sum is staggering.
Fortunately for Kanye, he deals in millions all the time. Million dollar deals and million dollar houses. In fact, Forbes reported that Kanye made 22 million in 2015 and 30 million in 2014. Therefore, Kanye’s debt load is about twice his annual earnings.
To put this into perspective, in 2014 the average American family made a yearly income of roughly 54K. To make things relative: the equivalent debt burden of Kanye’s predicament for an average American is having a debt load of 108K. While that is still a lot of money for anyone, debt that is twice one’s annual income is conquered every day in American. It might take some extreme measures, but it can be done – especially in a household with two working professionals (I’m looking at you, Kim).
Debt has been around for over 5000 years. Countless people have felt the psychological impact of debt, but paying off debt has been successfully conquered repeatedly. Kanye West should keep this in mind and realize his trials are not new. We all need encouragement, so send him a tweet (@KanyeWest) and help him along the journey.