Will Smith’s 5 money lessons for you4 min read . Updated: 10 Oct 2018, 09:05 AM IST
Having been poor, rich and then back to poor again, Will Smith decided to have a plan rather than meander along. He got a second shot and decided he will never be poor again
Will Smith was clearly one of the big stars at the HT Leadership Summit last week. The packed hall of suits and saris at Taj Palace Delhi went a little crazy when he bounded onto stage emitting war cries to get the energy of the room up. That prompted actor Farhan Akhtar who was moderating the conversation to say: we can do this for 30 minutes and then take questions, to another round of mass hysteria in the room. But jokes apart, Smith the star came across as a feet-on-the-ground person who found his spotlight the minute he got himself into a plan. In fact, some of the one-hour talk was around money and I found lots of money lessons in that time. Here are five of them.
One, pay your taxes. Smith did not start out as a Hollywood actor, he began as a successful rap singer. He made millions but omitted to pay his taxes. “I was young; I was growing up... I didn’t pay my taxes... They (Internal Revenue Service) come and they start taking your things." In fact, he owed the taxman almost $3 million and was broke because his next album failed. Smith went from rich to poor because he took the law of the land casually. Lesson from this is that if you have a vision for yourself as a successful person, staying within the law from the start is a good idea. Paying taxes and having clean books comes right on top. Specially true in a tax non-complaint country like ours where cash is still king.
Two, reboot when down. Smith took on a Hollywood role just so that he could make some money. He said: “My transition from music to films wasn’t really a choice. IRS took all my stuff and I moved to LA. I got rid of everything in Philadelphia. I was broke and our next album flopped. I had gone from having millions of dollars to going broke." It took a financial disaster to shake him out of his old life into a new one. Setbacks will happen to everybody and sometimes going down to zero, or even negative, is a good wake-up call. Remember that if you get fired with a large EMI on your head. Or when faced with a big personal crisis. Here is the moment when you press the reboot button.
Three, get disciplined. Smith landed on his feet with a Hollywood show, but “in the first three years of The Fresh Prince of Bel Air, the IRS was taking 70% of my money. I was still broke," he said. But having been poor, rich and then back to poor again, Smith decided to have a plan rather than meander along. He got a second shot and decided he will never be poor again. “I got really disciplined," he said. Getting into a plan is the most important thing in your money life. Making loads of money is not good enough if you don’t have a plan to make it stay with you. Smith said he realised the difference between ‘rich broke’ and ‘poor broke’ and decided never to be poor broke again. Rich broke have assets they can sell, poor broke don’t have money to fill gas in the car. Um, they don’t have a car."
Four, fail, learn, try again. “Fail early, fail often, fail forward and fail your way to the top... I have been lucky enough to embrace failure," he said. True in life and also true for money. None of us begin with the perfect plan with our money decisions. Smith says examine why you failed and then try again. Works perfectly well for money as well and the people who say “I was just unlucky with my money" simply don’t have a feedback mechanism that informs them of their errors. Very often the problem is not with the market or the fund manager but with us, when we pick a product that does not suit our needs. Or buying out of greed. Don’t be afraid to re-examine your plan if you think it is not working.
Five. Do the thing you fear the most. Smith bungee jumped out of a helicopter over the Grand Canyon on his 50th birthday. He said that when you do the thing you fear the most, it is out of the way for the rest of your life. Equity investing is similar. Many gold, FD and real estate investors are wary of an asset class they cannot wear or live in. This ongoing market carnage is the right time to face your fear of equities.
And to end with a Will Smith quote and the biggest money lesson of all: “We spend money that we do not have on things we do not need to impress people who do not care."
Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation