Growing up, so many kids dream of being superstars, especially professional athletes. Although chances are very slim that you will make it into the NBA, MLB, or NFL, it does come true for a select few individuals. Along with being able to play your favorite sport on national television, you get paid millions of dollars to do what you love, there are many down sides to being a professional athletes that most regular citizens do not see. One of the biggest downfalls of being rich and famous is how to handle that sudden influx of a large amount of money. Far too many professional athletes find themselves broke, in bankruptcy and without a viable way to earn an income if they are not careful.
The same happens to all of us albeit on a much smaller scale. For professional athletes, many of them find unscrupulous financial planners taking advantage of them, their spending may be out of control, poor investments, abuse their finances, and/or find themselves in much deeper debt when they retired than they were in when they came into the world of professional athletics. So, why are so many professional athletes going broke? Are they so different from the average American? Ironically, there are a lot of parallels.
ESPN’s 30 For 30 Series – Broke
Last month, ESPN aired a documentary as part of their 30 for 30 series called “Broke”, which showed how many professional athletes went from rich to broke shortly after their professional careers ended. In many cases, the same reasons that they professional athletes going broke applied to our lives. They trusted poor financial planners, had ill advised investments, overspent, went into debt spending more than they made, did not have multiple income streams, lived above their means, and were responsible for too many friends and family members. Child support, bad investments, and living above their means were the downfall for many of these men.
More Money Compounds Poor Decisions
There is always the question of what people would buy if they hit the lottery. Some people have dreams of buying their dream car, owning a vacation home on a beach, or simply giving more to charity. We all have different dreams of what we would do if we hit the lottery, but most of us only simply dream. Professional athletes sort of hit a lottery after years of incredible work ethic and playing, a select few hit a big payday when they become professional athletes. Here are some of the quotes from the ESPN documentary that give us a unique insight into the financial world of professional athletics and paints a picture of what poor money management does when you have more money than you could have ever imagined. Many of these players receive the money so quickly going from broke to rich and back again in the blink of an eye. Former NFL player Keith McCants said during the ESPN documentary, “I bought myself a yacht, a mansion, a couple of cars. That ain’t a million dollars. That’s seven million dollars. I pretty much gave it away.” Another NFL player, Andre Rison, admitted, “I guarantee you, I spent a million dollars on jewelry.”
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Professional Athletes Are Not Great Businessmen Either
While reckless spending is probably the number one preventable way to lose a fortune, you can find yourself in financial trouble very quickly with failed business ventures as well. Some of these athletes went on to finish college before pursuing the NFL or NBA, so you would hope that they would have been able to determine a legitimate business venture from a sketchy one. But, that is not always the case. Most professional athletes going broke invested money into businesses that ultimately failed. Many were talked into investing in business opportunities that were started by friends, family, or even teammates. Their intentions were good, but the projects were often bad investment choices. For every story of Payton Manning investing in Papa Johns restaurants and Magic Johnson investing in baseball and other ventures, there are many more stories of failed business ventures with professional athletes.
Taking Care Of Family And Friends
There is also the pressure of taking care of the people who took care of you after becoming a professional athlete. Most of these men had trouble saying no, not only to immediate family and close friends, but also distant relatives and mere acquaintances who were looking for money. Bernie Kosar was a professional quarterback for over a decade and recalls taking care of “25, 50 families”. Leon Searcy is now a coach, but he remembers when he was playing football that people looking for a handout knew his payday better than he did. While this may be unfamiliar to many ordinary people, it is not too far off. It is estimated that almost 18% of American parents continue to take care of their adult children after they graduate from college.
Child Support Is An Issue For Pro Athletes
Let’s not forget the lifestyle that comes with being a famous star, there are the women. And with the women came the children. Former boxer Evander Holyfield pays more in child support annually than many Americans make each year, because he’s supporting 11 children by nine different women. This may be manageable while you are working, but many athletes’ court ordered child support was arranged by the salary they made while they were still playing. Then, they must get it adjusted by a judge because they’re simply not making what they used to.
Over 78% of former NFL players have gone bankrupt or are under financial stress within two years after they stop playing. It is estimated that almost 60% of former NBA players are bankrupt within five years after they hang up their jersey. So how can players avoid what seems to be the inevitable of going broke between two and five years after their last game? Learning to say no, making sound investment decisions, and having the right financial adviser are good first steps. Budgets are not just for “regular people”; those making hundreds of thousands or even millions in their profession should have one as well. The money is not infinite, and if you don’t use it wisely, it will disappear.
Why are so many professional athletes going broke? Are they so different from the average American? Ironically, there are a lot of parallels between our lives. It is only the scale of the issues that are different. There are a lot of lessons that we can learn from professional athletes and how they manage their finances.
What about you? Did you see the ESPN show 30 For 30? What did you think? Are we really that much different than professional athletes going broke?