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Bankruptcy - it can happen to anyone

12 December, 2014Eoghan Hughes

What do Oscar Wilde and Mike Tyson have in common?

Not much you may think. One was a renowned poet and author, lauded for his witticisms and critiques of society, while the other, well, wasn’t. 

Neither is it anything to do with pugilism (Wilde famously losing a libel case against the Marquis of Queensberry, the founder of modern boxing), while Tyson’s eventual departure from the ring was as swift as one of his jabs.

No, what links them, according to the Daily Telegraph, is that both have suffered the “knock-out punch” of bankruptcy. Wilde, who sued Queensberry for libel, lost the case and was legally responsible for the costs of the defence, leading him to sell the production rights to several of his most important plays. Tyson meanwhile, whose penchant for jewellery, cars and mansions led to his spending hundreds of thousands of dollars a month, left him with supposed debts of $23m.

Joining this eclectic list of names in the red include Abraham Lincoln, Cyndi Lauper, Burt Reynolds, Larry King, Marvin Gaye, now-billionaire, Donald Trump and even MC Hammer, who was forced to auction off most of his belongings. Hammertime indeed. Closer to home of course, former England international David James also joined the list and has now been forced to sell-off some of his most prized memorabilia.

Bankruptcy, it seems, is no respecter of fame, whether one is a politician, musician, TV host or actor. What all of this goes to show of course is that if it can hit as diverse figures as Iron Mike and Wilde, it can affect anyone. Even cities are not exempt, as the citizens of Detroit will testify.

With the recent changes to the pensions industry announced by Chancellor George Osborne, fear of bankruptcy is once again on the rise, particularly among pensioners who will no longer be tied into an annuity, instead receiving a lump sum pension pot.

Scanning through the articles above, one of the common themes running throughout both the celebrity bankruptcies and “civilian” cases is that of a failure of planning. Many, often coming into significant sums of money very suddenly, find it extremely hard to resist the temptations of a consumerist society, spending money on things they can’t afford and don’t need.

This problem is endemic throughout society. The Young Persons’ Money Index, for instance, revealed that teenagers today face a £1m shortfall to fund their lifestyle expectations.

ifs University College believes that the key is financial education. As the Young Persons’ Money Index revealed, teenagers receiving apposite and appropriate financial education are less likely to make the mistakes demonstrated above. They are more likely to plan, budget and understand key financial concepts, enabling them to become confident financial consumers.

It may not have the ring of Wilde’s linguistic flourish: “When I was young I thought that money was the most important thing in life; now that I am old I know that it is”, but financial education is perhaps even more important.