Washington Redskins quarterback Robert Griffin III has decided to officially call the Washington, D.C. suburbs home after purchasing a $2.5 million home in the outlying suburbs in Virginia, according to the Washington Business Journal. The home, situated on a three-acre lot, features five bedrooms, six baths, an elevator and a wine cellar, and plans are underway for a swimming pool.
This is quite a starter home for the 23-year-old, second-year starter who is scheduled to be married on July 6 in Denver, Colo., where his fiancee has family living nearby in Boulder.
He certainly has the money to afford such a luxurious purchase. Less than a year ago, the 2012 NFL Offensive Rookie of the Year signed a four-year, $21 million guaranteed contract plus lucrative endorsement deals. Why shouldn't he purchase a multi-million dollar home just one year into his contract?
I'll tell you why.
In 2009, Sports Illustrated published an article which provided some answers to the question that has baffled many fans of the NFL and other professional sports leagues.
How can professional athletes who earn millions of dollars, and in some cases tens of millions of dollars during their careers, go broke and file for bankruptcy?
According to the article, 78 percent of NFL players are bankrupt or under financial stress within two years of retirement. Notable players who made millions of dollars and later filed for bankruptcy include former Redskins QB Mark Brunell, Vince Young, Lawrence Taylor, Terrell Owens, Raghib "Rocket" Ismail, Warren Sapp and dozens of former NFL standouts.
While the reasons for the bankruptcy filings vary, here are five of the most common reasons why NFL players face financial difficulties after their retirement.
One of the primary reasons for this astonishingly high percentage is due largely in part to player's the signing bonus is an extremely large sum that comes all at once. When a NFL rookie receives such a large financial bonus before stepping onto the field, that money is undoubtedly the most that they have ever received.
With that sudden wealth and the fame that comes attached to it, many young 20-something-year-old football stars suddenly flaunt their wealth and use poor—if any—judgement in what they purchase or how much they spend. It is, in some social circles, considered "status."
With new wealth and plenty of cash, first thoughts typically turn to extravagant, luxurious items such as cars (plural), houses (plural), over-the-top jewelry and lavish gifts for family and friends. They buy diamonds that may or may not be real.
Unfortunately, many young athletes are vulnerable and taken advantage of because they do not know any better. Their primary concern is they like the way that it makes them look. More accurately, they like how other people look at them or how they appear in other people's eyes.
Newfound wealth and youth combine for foolish mistakes. It would be difficult to convince any rookie who just signed with a NFL team to invest his money for the long term. What you have is a 20-something-year-old former college star who has made it big and wants to show everybody.
Stop and think about where many of these rookie players were financially just months prior to being selected in the NFL draft. Sudden wealth turns into a desire to have the latest toys, the biggest house on the block, the most "bling" and one of the guys with stuff. Expensive stuff.
After all, the veterans pull into the team's facility with their fancy cars—Bentleys, Ferraris and Mercedes-Benzs. We all want to be liked and fit in among our peers. And with the level of money involved with NFL contracts, big-time contracts and bonuses translate to high-priced items.
Lack of financial planning
As shown by the high number of former NFL players in financial trouble once their playing days are over, many were without solid financial advice. Players in the early parts of their careers are of the mindset that the money that they are earning is such a large amount, they couldn't possibly go broke.
Although it is offered through the NFL Players Association, should more be done for NFL players regarding financial planning?
Unfortunately, too many NFL players lack financial advisers or accountants. In some cases, the players have financial consultants who are afraid of losing their clients if they stand up to and tell them that they are spending too much too soon.
Bad investments plague NFL players for reasons unknown. Of the bankrupt NFL players mentioned earlier, former Redskins QB Mark Brunell filed for bankruptcy in June 2011 despite over $50 million earned in 18 NFL seasons. His losses included sizable investments in a hamburger franchise and real estate.
At the time of his bankruptcy filing, Brunell listed assets of $5 million and debts totaling $25 million, according to a June 2010 article in The Florida Times-Union.
Newly signed NFL players have been known to pay off their parents' mortgages, buy their families and close friends cars or other expensive items and help extended family members and others with financial gifts that are small lottery winnings to some.
While I applaud generosity and an athlete's desire to pay back or help another within his circle, many pro athletes do not know how or when to say, "enough is enough."
When family members are facing serious financial hardships and there is a possibility of defaulting on a home loan or missing a car or rent payment, it must be difficult to not provide assistance. I would imagine that it becomes more and more difficult to say "no" when they come around again.
Additional factors cited by Sports Illustrated that contribute to bankruptcy filings by NFL players include child support payments that went neglected and accumulated, divorce and players' naiveté, confusion and misunderstanding regarding taxes and other deductions.
There is also the unforeseen factor that a player suffers a career-ending injury or is unexpectedly released from the team. Suddenly, the money stops, and the expenses are still there.
In 2011, NFL commissioner Roger Goodell was asked to clarify a question regarding the average player's career in the NFL. Goodell explained, "If a player makes an opening day roster, his career is very close to six years." The commissioner added, "If you are a first-round draft choice, the average career is close to nine years."
Either way, NFL players need to prepare financially for life after football. With such a high percentage of former NFL players facing financial hardships after their NFL careers, the reality of this situation will occur before a player turns 30 years old.
I applaud and congratulate RG3 for all he has accomplished since signing his NFL contract less than one year ago. I hope he and other NFL players realize the phrase "live life to it's fullest" may not apply to those in the NFL.