One of the prime concepts behind this site is the difference between “net worth” and “earnings”. Net worth is what you have, left over, after all of your liabilities (mortgage, car payment, student loans, and other debts) are paid off. For most people, unfortunately, their net worth is very near zero.
Antoine Walker, the former Celtic who resides in Chicago, is a prime example of someone who earned a large amount of money during his lifetime and yet has a negative net worth. He recently declared bankruptcy, as summarized in this article:
After a 13-year career and over $110 million in salary, Antoine Walker has filed for bankruptcy after being hit with a $2.3 million foreclosure lawsuit on a mansion that he bought for his mother in Tinley Park, a small city south of Chicago. Walker, of Wiggle (or Shimmy) fame, just has too much debt. “Off the court, there were the cars, the jewelry, the houses, the suits, the gambling. He liked to move in an outsized entourage; his mother estimates that, during his playing days, he was supporting 70 friends and family members in one way or another. And speaking of his mother, he built her a mansion in the Chicago suburbs, complete with an indoor pool, 10 bathrooms, and a full-size basketball court. And then this: “Walker turned the pavement surrounding his home into a virtual luxury car lot – two Bentleys, two Mercedes, a Range Rover, a Cadillac Escalade, a bright red Hummer. Often, the vehicles were tricked out with custom paint jobs, rims, and sound systems at considerable added expense. He also collected top-line watches – Rolexes and diamond-encrusted Cartiers.”
There you can see where the EARNINGS go – onto cars, watches, supporting non-working friends, and also clothes.
One part of the article I disagree with because it is poorly worded:
Mr. Walker owns four properties: a $2.34-million home in Miami; two South Side apartment buildings each worth $190,000, and the Tinley Park home, valued at $1.4 million, according to the bankruptcy filing.
Mr. Walker, as they refer to him, owns NOTHING. He possesses some assets, but cannot make the payments to keep up with his liabilities, so net, he has no assets.
Mr. Walker, 33, lists liabilities of $12.74 million vs. assets of $4.28 million in the bankruptcy filing. Mr. Walker’s 2006 NBA championship ring, valued at $6,000, is listed among his assets, according to the Chapter 7 filing May 18 in U.S. Bankruptcy Court in Southern Florida.
This is a very sad story but one to learn from; no matter how high your earnings, if you keep spending enough money and taking on more debt, you will inevitably end up on the wrong side of the ledger.