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While charges and counter charges fly about Michael Jackson, a key fact is flying below the radar screen – that he may be headed for more trouble because of a $200 million debt.
Child abuse allegations are serious, but that case must be tried in a court of law. On the other hand, Jackson’s problems with personal debt offer a valuable lesson for us all.
Most estimates show Jackson has assets between $600 to $800 million, pretty substantial by anyone’s standards. But a combination of huge debt and lavish expenses may trim his financial wings. Expenses at Never Land Ranch are $2.5 million a year just for staff, plus costs of jet, limousine and assorted living expenses – which for Jackson, reach considerable levels. And the investment company that loaned him the $200 million is suing to recover.
The key lesson for us is this – when everything is going well, we can easily presume on the future, and borrow money based on that presumption. However anyone can fall, and fall quickly because of a variety of circumstances.
Jackson’s value as an entertainer now seems shot, whether he is guilty or innocent of the child abuse charges. The future income he presumed he would earn will not likely flow.
For us, a large customer may leave or go bankrupt (like Enron for many), we may lose our health, or suffer a business reverse. If we, like Jackson, have created huge leverage, that lever may break, and push any of us into bankruptcy.
The prophet Habakkuk wrote, “Will not your creditors rise up suddenly and those who collect from you awaken? Indeed you will become plunder for them.” (Habakkuk 2:7)
If Jackson’s debts were called today, would anyone buy the ranch, previously valued at $50 million, complete with its secret rooms? What would he get for it?
Any time we need to sell assets quickly, we get fire-sale prices. Avoiding debt, and not presuming on the future, is the only way to insure that we are not forced to sell at a public fire sale.
Steve Marr is the former CEO of the fourth largest import-export firm in the U.S., a company which facilitated international trade for many of the largest companies in America. Currently, Steve consults with with businesses and ministries utilizing ancient Biblical principles for success in today’s marketplace. Click here to contact Steve, or visit his website at www.businessproverbs.com.
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