Katie Price Downfall – 5 Budgeting Lessons the FIRE Community Can Teach Her

Katie Price is all over the tabloids again like a bad rash.  According to the worldwide media, her financial affairs are an absolute disaster – having spunked most of her 45 Million net worth.

katie price

Ok, the media are probably blowing a number of things out of proportion and I haven’t even seen the woman’s company accounts.

And first of all, I don’t follow those ‘reality tv’ stars.  The reality TV scene is my pet peeve. Why do we have to be subjected to this nonsense, day in and day out?

However, she has done well for herself, with regards to becoming one of the richest authors in the world (£26.9M in book sales) and setting up some successful businesses etc.

She might be (or was) a multi-millionaire, but she obviously hasn’t read, ‘The Millionaire Next Door’, by Thomas J. Stanley.  Otherwise, she wouldn’t be in this predicament.

It just annoys me how brash and financially irresponsible some of these celebrities are. I just want to shake them.  We can do better than that though.

Here are five budgeting tips Katie Price can learn from the FIRE (Financially Independent/ Retire Early) community:

Saving #1 – Cars

As a car enthusiast (especially of classics) and someone who does his own car maintenance, please don’t bastardize a vehicle with shocking pink. Some people think they have to make a ‘statement’.

katie price - pink landrover

The problem is, those sort of statements cost you money.

1. Leave the car as standard, and you’ll recoup the market value for your car.

When you modernize/ make changes to a house, it has the potential to go up in value. However, when you ‘modernize’/ customize a car, it goes down in value.  I was a boy racer in my late teens and chief marshall of a hill climb (car trials) club in my early twenties – believe me.

2. There are more cost-conscious vehicles/ SUVs that are cheaper:

To run, insure, tax and maintain than her current vehicle (Range Rover Sport). Hence, she needs to choose a vehicle which is more economical. Is a Chelsea tractor a need or a want? Ok, maybe she needs an SUV as she has a farm. So, we’ll give Katie that one.

I’ve used Parkers Guide to help Katie Price source a more economical SUV:

 

katie price - car comparison guide

The Dacia Duster and Hyundai Kona beat the Range Rover Sport, from all angles.

As well as the low price tag, Katie Price can save hundreds of pounds per annum if she changes SUV:

  • Better mileage per gallon
  • Petrol cars (proposed Dacia Duster and Hyundai Kona) being cheaper to run than diesel cars (her current Rangerover Sport) in the UK
  • Lower CO2 emissions hence reduced duty on road tax
  • Smaller insurance bracket
  • Reduced maintenance costs at dealership i.e. spare parts and cost of labour

Saving #2 – House

Miss Price has a rather large estate with 9 bedrooms, a tennis court, stables a swimming pool and 12 acres of land.  From what I’ve read, she bought it in 2014, for around 1.3 Million.  In fairness, she made around 700k from her last house.

1. Rent a Room Scheme (and decluttering)

Does Katie Price really need all these bedrooms though?  These bedrooms are costly. Not only are bigger houses more expensive, they also come with higher council taxes (generally), outrageous heating bills and maintenance costs.  What it costs for those extra bedrooms, could go towards paying down debt etc.

Simple living wouldn’t go amiss either. She can start by decluttering and freeing up those extra bedrooms, either for rent or for sale.

Katie has 5 kids, so she could at least rent out 3 of those bedrooms.

She could use the Rent a Room scheme, which is an optional scheme open to owner occupiers or tenants who let out furnished accommodation to a lodger in their main home. It allows you to earn up to £7,500 a year tax-free, or £3,750 if you’re letting jointly. You don’t have to be a homeowner to take advantage of the scheme.

I recommend Katie reads ‘Early Retirement Extreme’ by Jacob Lund Fisker. She will find out what is really costs to have those extra bedrooms and learn about simplifying her life.

2. Business Opportunity

Also, the stables and 12 acres of land could be used as a business i.e. horseriding lessons to pay for all the veterinary and associated farm animal costs.

The swimming pool looks like a cesspit i.e. never used and maintained. Hence, that should be filled in.

3. Sell and Downsize 

Another option is to sell and downsize, as a bankruptcy notice was filed against the property in 2016.

The mortgage is rumoured to be in excess of one Million, with 10,000gbp per month mortgage payments. Other maintenance costs are believed to be circa 120K per annum, as she has housekeepers, gardeners, and nannies on the payroll.

Hence, selling and downsizing would be the more cost-effective option.  The thing is, Katie has got her priorities wrong.  She should have spent money upgrading/ maintaining her house, instead of her car.

With the house in disrepair and a challenging housing market, she may not get the price she so desperately needs this time around.

Saving #3 – Partners

Katie Price has gone through 3 husbands.

Unfortunately, divorces cost money with:

  • Court fees, which are currently £550 for the filing of their petition
  • Legal fees on top of the court fees (many solicitors prepare divorce papers for a fixed fee)
  • If their financial position is complicated, involving pension or business interests, then they need highly specialized advice, from highly specialized lawyers. Kerching!

Then there are some divorce preparation steps Katie has to take, to protect herself and her net worth:

  • Separate her Non-Marital Assets – Non-marital assets as defined is the property considered by the courts belonging to one spouse or the other and is not subject to equitable distribution. Simply put that it is not part of the assets that will be divided in a divorce proceeding
  • Start Her Own Credit History – If you gift your house to the spouse during the divorce, and they default on the mortgage – then, your credit history is…well, history. It happened to a good colleague of mine and it’s impossible for him to buy a house now.
  • Close Joint Accounts – Examine all the joint accounts and different ways where your spouse can run up a credit card or withdraw and spend money. Freezing or closing your joint accounts can be a solution in order to keep track or keep your spouse from spending additional debt that you could be held responsible for.

It’s also rumoured Katie Price has been bankrolling her former flames i.e. paying off their credit card debt, paying them a weekly allowance or hush money.

Perhaps Katie should think of having a prenuptial agreement drafted and signed for her next husband.  A good colleague of mine did exactly that. Once bitten,  twice shy.

And she shouldn’t buy her spouse expensive gifts, especially depreciating assets such as high-performance cars.

It really has been a case of ‘your love or your life’ with Katie.  She’s had to put up with emotional and financial turmoil with her previous partners, leading to a tumultuous life.

Katie Price needs to choose herself.

Saving #4 – Lifestyle

Katie Price is a classic example of lifestyle inflation.  She lives life to the max.  Which is great, to a certain extent.  But she has an image problem.

She’s keeping up with the ‘modern celebrity age’.  The media love her (as she’s relatable), as does Joe public (readers want to be her). She thrives on this and it’s one big vicious circle.  She is a niche market, a plugin for the ‘A-listers that ordinary Joes couldn’t afford to copy or look up to.

Katie is a brand. She’s the ordinary girl, living the extraordinary life.  In fairness, she has marketed herself very well.

1. Spend Less Than You Earn 

But, she’s making the classic mistake.  She’s spending more than she earns. She is living paycheck to paycheck.

She needs to fire up her spreadsheet and start tracking her spending and separate her needs and wants. It’s best to get off this hedonic treadmill. As the theory goes, as a person makes more money, expectations and desires rise in tandem, which results in no permanent gain in happiness.

She’s exceeded the fulfilment curve. She’s not aware of when enough is enough.

Katie Price urgently needs to read, ‘Your Money or Your Life’, by Vicki Robin. i.e how to get your financial affairs back on track, get on the crux of that fulfilment curve and start budgeting.

Saving #5 – Plastic Surgery

It’s rumoured that Katie Price has spent around a cool, half a million on plastic surgery.  It’s perfectly normal to pamper yourself and improve your appearance. But this takes the biscuit.

katie price - boob job

The woman has had 8 boob jobs (and 8 bum lifts), ranging from 32B to 32GG. But not in that order.  And countless other procedures.

First of all, it’s not healthy having all that surgery.  It’s very traumatic on the body and mind. And those GG assets can attract all the wrong men.  This could well lead to more emotional and financial disasters.

1. The Latte Factor

It’s also rumoured, she spends up to 740gbp per annum on Botox and 700gbp per annum on dermal fillers. In the financial independence community, we have something called the ‘Latte Factor’ i.e. the phenomenon whereby many small purchases add up to a significant expenditure over time.

In Katie’s world, this would be called the ‘Botox & Dermal Filler Factor’.  Sure, she’s not having a surgical procedure done every day (at least I don’t think so!)  But, these particular procedures soon add up over time.

katie price - botox and dermal filler factor
Compound Calculator Courtesy of Monevator.com

If she were to invest this amount (the money spent on the two procedures annually) of money in an Index Fund, then she could retire with a nice little nest egg.

She could potentially net 64,616.54gbp over 20 years if she gives up the botox and dermal fillers (as shown in the above calculator…not including fund fees).

Over the last 90 years, an 80/20 split i.e. the Vanguard Lifestrategy 80/20 accumulation fund, has an average annual return of 9.6%, which is roughly 6.5% after inflation” (according to the Bogleheads Forum).

I also think Katie has to work on inner issues first (her self-worth), before having any more plastic surgery.

Takeaway

You can clearly see where Katie Price’s Net Worth has been impacted.

The problem is, it’s all spiralled out of control.  The image thing is so ingrained now, she would struggle to take up some of our ideas on board.  It would destroy her current brand.

She would most likely scoff at some of the FIRE community suggestions.  Can you really see her cruising around in a Dacia Duster?

Katie is a Barbie girl, living in a Barbie world.  Life in plastic, it’s fantastic? She needs to stop the surgery (and funding former boyfriends) and start working on her inner self…her inner game. And invest this money back into a savings plan i.e. the index fund mentioned above.

The books mentioned above could quite possibly help the general public get their financial affairs back on track.  However, I think I could be wasting my time with Katie.

Katie Price needs to think about rebranding and her next step in life. Quite simply, it’s her Money or her Life.

Now I would like to hear from you in the comments:

How should Katie Price move forward to get her life and financial affairs back on track?

Thanks for reading.

 

 

 

 

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