I read that when Michael Jackson died, he was $500 million in debt. How does someone get into that kind of debt?
In: Economics
$500 million in debt but that does not include his assets. So there are two things going on here.
One, as Redditor shawm1980 rightly explains below, is that wealthy people don’t spend their own money. They borrow against assets and then spend the borrowed money because it is actually more financially advantageous for them to do so. So many wealthy people have a large amount of debt on paper.
But the other thing that was going on in MJ’s case is that he was a notorious spendthrift. It was not at all unusual for him to drop tens of thousands of dollars on shopping sprees. He commissioned tons of artwork, usually of himself, and spent lavishly on friends and supporters. He had a full zoo and amusement park at his home at Neverland, which required a full-time staff to maintain and operate. He traveled often and stayed in expensive hotels, frequently for long stretches at a time. And his output, both in terms of recorded material and live performances, dropped precipitously after the first child-abuse allegations came to light in 1993. From that point on he only released three albums, one of which was a partial greatest hits collection and another, *Blood on the Dance Floor*, that only had four new songs (the rest were remixes). So he wasn’t making the kind of money he had made in the past, but his expenses were just as big. Factor in the damage done by multiple allegations and settlements and it starts to become clear just how precarious his finances were.
That was the reason for the *This Is It* shows at London’s O2 Arena. He needed the money. If all had gone according to plan, the revenues from those shows would have put him back in the black, at least for a while. But his habits probably wouldn’t have changed, so he very likely could have found himself back in the same position after a few years.
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