Why Professional Athletes Are Going Broke, and What We Can Do About It
Imagine working hard for a financially-stable living, and then seeing it all turn moot.
Having multi-year, multi-million dollar contracts transformed into mere distant, foggy memories, and holding onto cash assets that run drier than a piece of wood in the Sahara.
Such is the case for many professional athletes nowadays, whose fanatically free-spending ways seem to spiral them downwards into financial purgatory.
Money has become a tough commodity for professional athletes to maintain after their playing days, and in turn more and more players have been filing for bankruptcy.
Author Pablo S. Torre notes in his Sports Illustrated story entitled, How (and why) Athletes Go Broke, that after two years of retirement, 78% of NFL players go bankrupt.
Additionally, in the NBA, after five years of withdrawal from the league, an estimated 60% of players become broke.
Is it just me, or are those statistics eyebrow-raising?
That an individual who pockets more money in one year than an average American makes in a whole lifetime can end up in such a sorry financial state?
Agent Leigh Steinberg in the story claims that athletes make two fatal mistakes which lead them to their financial pit-fall:
“Hiring the wrong people as advisers, and trusting them far too much.”
Certainly, retired NBA player Scottie Pippen fell prey to the act, hiring the wrong financial adviser and losing $27 million in investments because of it.
But his tale is hardly the only one in which a once-glorified athlete fell from financial-grace.
Last July, infamous dog-fighting quarterback Michael Vick filed for bankruptcy because of his inability to pay off $6 million in bank loans that he put toward three different “projects.”
As a result, he’s had to put his Atlanta mansion up for sale to help cover the costs.
Last year, former NBA player Latrell Sprewell fell behind on the payments on his yacht, which ultimately had to be repossessed. His house, too, was filed in a foreclosure suit from a bank as he failed to make outstanding mortgage payments for it.
Fellow NBA player Kenny Anderson earned $60 million dollars over the course of his career, and subsequently filed for bankruptcy in 2005 as a result of poor money management.
The story may vary from player to player, but the fact remains that far too many names have been caught up in the money evaporation fiasco.
And it begs the question:
“Should professional athletes be forced to take financial investment or planning lessons?”
Now I know that they’re not kids, not school children, and most likely not willing to take advice from someone with regards to their money. But wouldn’t it be supremely beneficial to them?
No longer would they be prey to the same mistakes as an uneducated lottery-winner—which young professional athletes are likened to because of their often times free-spending, and financially uneducated ways.
They would learn the importance of saving, both to benefit themselves—and also their family and children—and as well would learn of the risk taking involved with investing money into a business, which seems to be the new fad associated with being a pro athlete.
As it is, pros are careless with their assets, reckless with their spending, and uneducated with their investments. The monumental checks and guaranteed money that they receive might as well be kissed goodbye and flushed down the toilet.
Game paychecks become “Going out money”, and new contracts equal new houses and cars—both investments that either make no money, or depreciate as time goes on (facts that athletes often times overlook or simply don't realize.)
Hardly any money ever goes into bonds, savings accounts, or stocks; all which hold the potential to appreciate in value as time goes on, and thus helping to increase and solidify their fortunes.
This is where education from a financial expert would come in.
I firmly believe that if players of all sports were forced to have clauses in their contract that called for them to have one-on-one meetings with financial advisers or investors, that they would become more knowledgeable with their financial assets, smarter with their spending, and in turn eliminate the chance of becoming “broke” when they finally do decide to hang up the jersey.
It is in this way that they can break away from the aforementioned riches-to-rags stories and instead write—and benefit from—their own riches-to-richer story.
Because what’s more depressing than seeing a life go to waste as a result of an empty wallet?
- [Sports Illustrated: How (and why) Athletes Go Broke]
- [Business Pundit]
- [The Journal Sentinal]
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