By DREW JAFFE
You may not think of Hollywood as being a source of personal finance information. However, if you watch your favorite movies a little more closely, you may find they are filled with valuable lessons. Here are six of the most helpful tips we found on the silver screen.
1. 'The Big Short' (2015)
This 2015 film chronicles the beginning of the Great Recession, primarily from the eyes of various workers in the financial industry.
One is hedge fund manager Michael Burry, who predicts early on that the U.S. housing market will collapse due to its reliance on subprime loans, which are often given out to people who may not be in the best position to pay them back. After he starts betting against the housing market, others in the industry start to take notice of the impending economic shock as well.
Takeaway: Try to only borrow money you know you can pay back.
In the early 2000s, millions of Americans with shaky credit histories took out mortgages, taking advantage of low interest rates. When their adjustable rates rose, many borrowers found themselves unable to make their monthly payments and had to give up their houses.
If you have an adjustable-rate mortgage, make sure you're able to make the monthly payments, and be aware that the interest rate may change. It may be wise to make sure you have room in your budget for higher monthly payments if interest costs increase.
2. 'The Wolf of Wall Street' (2013)
This biographical film charts the rise and fall of Jordan Belfort, a stockbroker who establishes his own firm in the 1980s and scams investors out of millions of dollars by persuading them to buy stock far above market value. Once they buy the stock, its price falls and they're out hundreds, thousands or even millions of dollars.
Belfort quickly becomes a Wall Street giant, earning mountains of cash and blowing much of it on wild and extravagant parties. His rollercoaster of a career comes to an abrupt end, however, when the FBI busts him for fraud.
Takeaway: Do your research before you invest.
While there are plenty of lessons in this movie for those looking to make quick cash at any cost, there's an important takeaway for honest investors as well. Make sure you research the product or company you're thinking of investing in beforehand; it may help you avoid making investments you'll regret in the future.
Forbes recommends consulting with experts who know the business and industry you're looking to invest in, and doing your own research. The more prepared you are before you buy, the less likely you are to fall prey to smooth talkers like Belfort.
3. 'Confessions of a Shopaholic' (2009)
Rebecca Bloomwood is a journalist who dreams of writing for a top fashion magazine. Her obsession with clothes, however, has also landed her with a mountain of debt. She has 12 credit cards to her name, all of which are maxed out.
Things appear to turn around for her when she snags her own column in "Successful Savings," a personal finance magazine, but her financial woes ultimately catch up with her when the debt collector comes knocking.
Although she manages to slowly work her way out of debt, her reckless spending on clothes at one point jeopardizes both her career and personal relationships.
Takeaway: Spend within your means.
Even if you have a steady income, it can be easy to rack up debt and much harder to pay it off. Rebecca was able to get out of her financial troubles relatively quickly by selling her clothes, but not everyone's journey out of debt may be quite so straightforward. It can take years to pay off debt -- and years longer for your credit score to return to normal.
To avoid this predicament, try creating a budget based on your current income, and don't rely too heavily on credit. The sooner you develop healthy spending habits, the less likely you are to become a shopaholic like Rebecca.
4. 'Up' (2009)
Carl Fredricksen is a lonely widower who spends his days glued to the chair on his porch, grumbling about the world. When Carl gets into a physical altercation with a neighbor and is forced to leave his home, he embarks on a trip to Paradise Falls in South America by turning his house into a makeshift airship kept afloat by thousands of balloons.
He and his wife had always dreamed of journeying to the falls, and they set aside money for their trip whenever they could. But they were frequently hampered by accidents that drained their savings.
Takeaway: Have an emergency fund.
Carl and his wife were wise to build up savings. The money they put aside, although intended for their trip abroad, functioned as an emergency or rainy-day fund that protected them against unforeseen troubles.
Having a fund for you and your family can help you weather financial storms as well. Although you generally can't predict how much you'll need when emergencies arise, experts recommend saving anywhere from three months' to a year's worth of income in an account.
5. 'The Money Pit' (1986)
Walter Fielding and Anna Crowley are a young couple who stumble upon a million-dollar house on sale for only $200,000.
Captivated by the prospect of living in a mansion, the couple impulsively buys the house. However, they quickly realize that it's in serious disrepair, finding one problem after another.
They end up dumping far more money into the house than they anticipated and push their relationship to the brink.
Takeaway: Don't rush into buying a home.
For most people, buying a home is a huge investment, both financially and emotionally. As 'The Money Pit' shows, acting too quickly or foolishly can cost you dearly.
Before you sign the deed, be aware of all the potential expenses of your new home, not just the listing price. This can include the cost of insurance, homeowner association fees, real estate taxes and the cost of repairs.
You may want to consider hiring a trusted realtor and home inspector who can locate potential problems with the house you're interested in and give you a better sense of what you may pay in the long run.
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