The ultimate financial pitfall checklist

Once upon a time, there was an international superstar who had it all: fame, fortune, and a mansion with golden gates. He lived like a king, buying fancy cars, expensive jewelry — he even had pet tigers. But then one day he had no more money left. He was bankrupt. And that’s the story of how one of the highest paid athletes in the world got his fortune knocked out.

Sound familiar? Well the point is, it doesn’t matter how much money you make, you have to be smart with your spending. And that’s doubly important when you’re just starting out. Because it’s easy to get caught up in the excitement of that first big paycheck and forget that there’s no guarantee another is coming your way. For example, what happens if an injury sets you back? Or if the movie never gets released because of some drama with the director? Hopefully it won’t happen. But it could. And if it does, you don’t want to be regretting your past spending habits.

When you sign that first big contract, it can be easy to think all that money is going into your pocket. But in reality, you’re going to have to hand over a good chunk of it to Uncle Sam come tax season — and in all likelihood it could be a larger percentage than you paid before you made it big.

Many young stars get caught off guard by taxes and underestimate how much they’ll have to pay. Either because they haven’t had to deal with them before, or because they suddenly find themselves making more money and in a much higher tax bracket. So do yourself a favor and plan ahead, or you could be dealing with some costly mistakes.

We've touched on the idea that your first big contract isn't a promise of continued success. But let's take a moment to imagine the best case scenario. You make a sensational entrance onto the scene, earning awards and recognition. Lucrative contracts and endorsements soon follow, and before you know it, you're a household name. But even the most exciting career journeys lead to retirement.

It might not be top of mind for you at the moment. But it’s bound to happen. For pro athletes, it’ll probably happen by the time your 40; and for actors and entertainers, your prime earning years could be behind you even earlier than that. That means you’ll have half your life (or more) to live. And unless you have plans for a second career, serious entrepreneurial skills, or one of those decades-long deferred contracts — you’re going to be living off the money you’re making right now. So start spending wisely and planning accordingly. Because your paychecks aren’t going to come in forever.

After word gets out you’re going big time, everyone’s going to know you have money. Family. Friends. Loose acquaintances. Chances are, some of them will be knocking on your door for financial help at one point or another. Maybe reaching out to ask for a loan to make a big purchase. Or pitching you with a "brilliant" business idea you need you to invest in. Some young stars feel guilty or ungrateful saying no. Then, before they know it, they find themselves handing out money like a game show host.

Don't get us wrong, it's great to want to help out your loved ones. But you also need to remember that this is your hard-earned money and you need to make it last. So the next time your third cousin asks for a loan to launch a new “sure-fire” app, just remember: "No" is a complete sentence.

You know that "No new friends" rule? Live by it. At least when it comes to your finances. Because while friends and family might bug you for money with good (if misguided) intentions — the same can’t be said for scammers, fraudsters, and shady salespeople. To them, you’re just a walking dollar sign.

But don't worry, you can still have a social life and protect your cash. Just be smart about who you let into your inner circle. Don't trust someone just because they have a fancy business card or a slick sales pitch. Do your research and make sure they're the real deal. If it’s too good to be true, it probably is. And just because someone says they have your best interests in mind doesn’t mean they actually do. So lean on your trusted network, ask the tough questions, and don't let anyone hustle you out of your hard-earned money.

Through the years countless budding stars have mismanaged their finances, giving little thought to their future needs. This can quickly become a catastrophe. The harsh reality is, not every star gets to ink a mega contract, and even those who do need to ensure it lasts a lifetime. That's why understanding and steering clear of common financial pitfalls is crucial. Overspending, tax neglect, inadequate retirement planning, over generosity towards friends and family, and falling prey to unscrupulous individuals. By avoiding these traps, you’ll help lay a solid foundation for your future — and make success more than just a one-hit wonder.