Why Bag Ladies are Financially Savvier Than Many Celebrities

Singer Dionne Warwick and the Bag Lady: Guess who currently has a higher net worth. (Hint: If you're torn, reread the title of this post.)


Grammy Award winner Dionne Warwick, who found fame in the 1960s singing “Do You Know the Way to San Jose?” filed for bankruptcy yesterday.

Younger folks may recognize Warwick from the 1990s, when she was the celebrity spokesperson for the Psychic Friends Network, or as a member of “Hollywood Squares” in 2002. She was also on “The Celebrity Apprentice” a couple of years ago.

Despite all of her success, Warwick is now almost certainly poorer than you, me and even the local bag lady — at least on paper.

In fact, here is a breakdown of Warwick’s current assets and liabilities:

  • Total Assets: $25,500
  • Total Liabilities: $10,700,000
  • Net Worth: ($10,674,500)

According to TMZ, a representative for Warwick seemed to blame the IRS:

“In light of the magnitude of her tax liabilities, Warwick has repeatedly attempted to offer re-payment plans and proposals to the IRS and the California Franchise Tax Board for taxes owed. These plans were not accepted, resulting in escalating interest and penalties.”

Although she’s a relatively minor star today, Warwick’s stated monthly income is still a whopping $20,950; that’s more than a quarter-million dollars per year.

Now, I know what you’re thinking: How in the world can anybody go bankrupt if they’re earning $250,000 annually?

In Warwick’s case, her monthly expenses consumed 99.95% of her income ($20,940) — including $5000 on housekeeping and $4000 for a personal assistant. That’s a recipe for financial doom no matter how much lucre you’re bringing in each month.

As a point of reference, my monthly household living expenses — for everything from the mortgage to entertainment — currently come to, on average, just a hair over 50% of my income. That provides me with a nice cushion for distributing the remainder of my income to stuff like my rainy day and emergency savings accounts, my long-term savings for big ticket purchases, my retirement fund, and … oh, yes — my TAXES!

True, the cushion wasn’t always that big — a quick check of my expenses spreadsheet shows that, 12 years ago, household living costs consumed 75% of my income — but it was still enough to ensure I could meet all of my obligations and responsibilities in life. How Ms. Warwick thought she could continue to do the same by saving a nickel out of every $100 she earned is tough to comprehend.

The bottom line is financial freedom doesn’t depend on money so much as it relies on a commitment to fiscal discipline and personal responsibility.

Remember, there are lots of folks out there earning millions of dollars every year who aren’t financially free, just as it’s also true that there are folks earning less than $40,000 who are financially free. Dionne Warwick is just the latest in a long line of millionaire celebrities whose spectacular financial failures can usually be traced back to the same fatal flaw: a steadfast refusal to spend less than they earn.

Photo Credits: istolethetv (Dionne Warwick); Marcy Hargan (Bag Lady)


  1. 1


    When Willy Nelson owed the IRS he went on tour. Dionne could probably move from casino to casino in the USA staying in a comp room, eating the free breakfast and singing for her supper and the IRS every night.

    It is not too late her to find financial success. I know because my pyschic predicted it.

    • 2

      Len Penzo says

      Jane, your comment reminds me of a favorite joke of mine:

      What has 40 legs, 40 arms and 3 teeth?

      The front row of a Willie Nelson concert!

  2. 4


    Very true. It’s amazing how celebrities, athletes, and all that are so silly when it comes to money. I think the biggest mistake they make is that they think their income at their peak will come rolling in for the rest of their lives. In fact, most singers, actors, athletes, etc. who hit are big time are going to get one shot at that, then fade back. They spend like it’s going to go on forever, when it’s not.

  3. 5


    There are stories abound in the U.S. where millions-earners file for bankruptcy. You cannot run from the wrath of used-to-be Mafia (watch Charley Varrick with Walter Matthau) and IRS.

    Wesley Snipes is in jail for 3 years because of back taxes.

    Ed McMahon (hiyo) Johnny Carson sidekick came on TV a couple of years before he passed away. He was making close to $6 million a year. He could not make his monthly mortgage payment.

    Someone suggested he should write a book about experiences he had with Johnny Carson. However, more than anything, he appealed to his rich friends to help him and that’s what they did.

    His yearly expenses were more than what his total income was. You make $6 million a year and you are in debt and you can’t pay your monthly mortgage? That can be a sorry state for anybody.

    I am on fixed income and I am debt free except the monthly mortgage which for us is at present manageable.

    Many folks these days don’t believe in God but I thank God for that.

    • 6

      Len Penzo says

      It does boggle the mind how anyone could earn so much money and yet, when it’s all said and done, end up with almost zero wealth.

      My brain is hard-wired to the “ant” (rather than the “grasshopper”) mentality. Frankly, if I had the income of these celebrities, I would be miserable if I had to spend all of it.

      No, really. I’m serious.

      • 7

        Volfram says

        My brain is wired more “Grasshopper” than “Ant” and I think I’d still have trouble spending $6M per year.

        I’d probably give most of it away.

  4. 8

    Chandra says

    If she can afford housekeepers and personal assistants, she shouldn’t be allowed to declare bankruptcy! What a sham!

  5. 9

    Funancials says

    It’s not about what you make, it’s about what you save. I’m curious if her personal assistant and housekeeper are relatives. I see a lot of celebrities go broke by trying to support everyone they’ve ever met.

  6. 10


    To be honest, I bet she can “blame” her troubles on the state of California. I bet they have charged her at least $10 million in taxes over the course of her career. If she lived in Florida or Texas, she probably wouldn’t be bankrupt (although she wouldn’t live in hollywood and wouldn’t make money, but you get the point).

    • 11

      Len Penzo says

      Well, for what it’s worth, it feels like I’ve paid the state of California at least $10 million in taxes during my lifetime.

  7. 12


    It always amazes me when I read stories about people who can’t make ends meet on such a large amount of money! But then, there are probably millions of people making less than me who marvel that I haven’t done better with what I’ve made.

    Although I do agree that it’s hard to justify filing for bankruptcy when you’re spending that kind of money for housekeepers and personal assistants. There’s obviously room there for some adjustments. And I love that her representatives are blaming the IRS. Like she should somehow be exempt from paying her taxes simply because she wants to spend more of her money. Don’t we all!

  8. 14


    That’s nuts. That’s why controlling your expense is the first step in personal finance. If you can’t control your spending, it doesn’t matter how much money you make.
    I’m sure she’ll be able to live a more comfortable life than a bag lady though.

  9. 16


    Here’s something funny. I agreed with you as soon as I read the title. (I did read the post though). A bag lady is going to squeeze everything they can out of every dime they make. I think that to a celebrity, money is an elusive concept since they have buckets of it coming in periodically. The smart ones hire financial planners and money managers. The rest, well, look at Dionne!

  10. 17


    Maybe it was the fear of becoming a bag lady that led Warwick to spend this way…

    Studies suggest that no matter how successful women are, this is one of their greatest fears. I can understand that.

  11. 19

    Lisa says

    I once new an architect who would get $200,000 to do a job then consider that to be ‘his’ payment — somehow losing sight that he needed to do the JOB with that money. Abstracts like giant piles of cash seem to boggle people. They lose perspective on the long term. Assume this is the last satchel full of cash you will ever see….

  12. 20

    Spedie says

    My monthly household basic expenses are 41% (exactly) of my take home pay. I have plenty left over for now, anyway. To have a housekeeper at 5K per month and a personal assistant at 4K per month is ridiculous. That woman needs to revisit Earth from Mars.

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