Last week I was showing my daughters some of the classic 90s Hip-hop dance music that I used to listen to (and sometimes dance to) when I was younger. This started with Vanilla Ice (“Ice Ice Baby”), then moved to Kriss Kross (“Jump”) and then finally to MC Hammer (“U can’t touch this”).
It then got me thinking more about MC Hammer as I had heard that he was one of those superstars who made lots of money and then lost everything. So I did some research and he has a really interesting money story which I shared with my daughters. Especially as he eventually ended up following the 3 rules of money that 90% of people don't!
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The M.C. Hammer Story
Becoming rich …
For those of you who don’t know MC Hammer (or can’t remember him), he was a massive superstar in the ’90s. He had catchy hip-hop/dance songs. He had trademark parachute pants, dance moves (“The typewriter”), and a saying (“Hammer Time”). He was literally everywhere. I even remember watching a cartoon series, Hammerman, which revolved around a pair of speaking dance shoes.
All this fame meant that he was making a lot of money. In fact, in 1991 alone, he earned $33 million!
MC Hammer started spending money at an incredible rate. He subscribed to the philosophy that money is for spending! He had 17 cars (including top-of-the-range sports cars), a private jet, two helicopters and racehorses.
The biggest expense was his house. It was a 40,000-square-foot mansion which cost him $12 million. He then spent a further $30 million making it his own. This included a gold hot tub and toilet, statues of himself, Italian marble floors, tennis courts and a basketball court.
In one interview, he said this about his house:
“When I moved in here, it felt more like I was still on vacation, … but I've only used the marble steam room in my bathroom once and I've probably never even sat on the couch in the living room”
He even recruited 200 of his friends to be his entourage, costing him ($500,000 per month).
As a side note, he grew up in a bad neighbourhood where many of his friends were part of gangs and getting in trouble. Therefore, he wanted to recruit them as he felt that he could change their lives for the better with money and a purpose, i.e. he was trying to use his money for good.
At the time, no matter how much he spent, he still made much more. He was RICH. He never had to think about saving or investing as he believed he'd just keep on earning and partying.
Then the party stopped!
Becoming poor …
Unfortunately, as music trends moved on, from dance hip-hop to more gangster hip-hop (Ice Club, Coolio, Warren G), MC Hammer became less popular. With that, his money started to dry up.
He still had the big house to maintain and was still paying his 200+ friends to work for him. He was now spending a lot more than he was earning.
He had no money to fall back on. He had to sell his house for around $5.2 million (remember he paid $12 million plus $30 million making it his own!).
He ended up with $13 million in debt! Essentially, MC Hammer's net worth went from over $70 million in his prime down to -$13 million.
In the end, he had to file for bankruptcy in 1996. I explained to my daughters that bankruptcy is a legal process where you admit that you can no longer pay off all the debt that you have - the government then clears off all your debts. As a result, you are required to sell most of your valuables and it will mean it will be really hard to borrow any more money in the future. It’s also a very public declaration that you have not been good with your money.
It then got worse for MC Hammer, in 2013, the IRS (US tax revenue) hammered (pun intended) him with a bill for $800,000 for unpaid taxes dating back to 1996. He was officially POOR.
These setbacks would have driven most people to despair … not MC Hammer!
Becoming wealthy …
After losing his mansion, MC Hammer took action to change his financial position. He moved to a very modest house. He was very humble about what happened to him and felt he could learn from his experience.
He changed his life around. He used his legacy to do concerts to start earning again but he didn’t start spending again. He learned about saving and investing. He now invests in technology companies (such as Twitter). He also discovered new ways to earn money such as helping executives prepare for presentations or important interviews. As he started earning more, he started investing more.
MC Hammer now has an estimated net worth of $2 million.
Whilst this might be a lot less money than he had before, how he manages his money means this money is likely to grow rather than end up losing it all (again!). He is now WEALTHY!
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Summary of the MC Hammer Story
MC Hammer was never a bad person. He came into a lot of money very quickly and never learned how to look after it. He ended up spending too much and running out.
This is such an important lesson when it comes to money. When I hear stories of people making money quickly, e.g. those who got lucky with cryptocurrency, NFTs, lottery winners or GameStop stocks, I always fear that their money won’t last. They will either overspend and feel overconfident that they can similarly reproduce the money in the future.
We need to teach our kids to look after their money. They can still spend but they also need to save for the future.
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Thanks for reading!
Author of the best-selling book, Grandpa's Fortune Fables
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