2 Things to Learn From Lindsay Lohan's Credit Card Crisis
Written by Beverly Blair Harzog
Posted On: April 20, 2010
You'd think being rich and famous would leave you with enough money to make your credit card payments. But I guess if your credit card bill is for more than a half million dollars, it's hard to find the cash.
RadarOnline.com reports that Lindsay Lohan owes around $600,000 on her credit cards. Apparently, one card has already cut her off. There are also reports that she hasn't changed her spendthrift ways and more credit card cut-offs are expected.
In a way, she's experiencing the same kind of challenges that the rest of us do��just on a much, much grander scale. Here are two takeaways for us regular folks:
- 1. When your circumstances change, you have to change your spending habits. Adapting to changed circumstances seems to be a common problem among celebrities. The movie career hits the skids, but the actor keeps right on spending as if nothing had changed. But the bank account balance has changed, and that's where they get into trouble. Lohan's struggling to pay her debts because the former star of Mean Girls isn't working very much or commanding the type of money she used to.
- In the past few years, many of us non-celebs have lost jobs or perhaps didn't get raises because of the economy. The way to avoid getting yourself into a financial hole is to decrease your cost of living until the storm passes. Sometimes, it means cutting out all unnecessary expenses. It's hard to imagine that Lohan's $600,000 debt doesn't include a lot of really unnecessary expenses.
- 2. Pay attention to the amount you're putting on credit cards. When the spending is done via credit cards, the merchandise almost feels free. That's true whether you're buying a Mercedes with your American Express card or a new outfit at the mall. But when the credit card bill comes, reality hits you in the face. For Lohan, it probably felt more like a knock-out punch.
- If you're consistently surprised when your statement arrives, you need to set a budget and stick to it. Know how much you're putting on your credit card before you step into the checkout line. And if you're carrying a balance that you can't pay off at the end of the month, don't step into the checkout line at all.
Most of us would jump at the chance to have a job where we could make millions. But being a non-celeb has its perks, too. If you ever have a credit card crisis, at least you won't end up being the headline on RadarOnline.com.
Beverly Blair Harzog is a spokeswoman and contributing editor for CardRatings.com. She's a former CPA and an award-winning personal finance journalist. She's a former columnist for the Navy Federal Credit Union's magazine, Home Port, and has written about credit issues for CNNMoney.com, FoxBusiness.com, Good Housekeeping, Bankrate.com, Bottom Line Wealth, CreditCards.com, AARP Bulletin Today, and more. She's also the co-author of The Complete Idiot's Guide to Person-to-Person Lending (Alpha Books/Penguin, April 2009). Follow her on Twitter @beverlyharzog