Why Are Professional Athletes Going Broke And Why You Are Too

by Hank Coleman

Why are professional athletes going broke?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?

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 575 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 12 comments… read them below or add one }

John S @ Frugal Rules

I saw the show and thought it was so sad to see so many athletes so broke. It really did not surprise me, but it’s just amazing at how many of them fell for completely ridiculous “investment” ideas.

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BD Invictus

Before Butch Jones left U.C. recently, local news discussed college/ncaa coach’s salaries.

For a person who worked hard to earn a degree(s), now earns $80k/year, it would take them 50 YEARS to make what Urban Meyer makes in one. 20 years to make what Jones made at U.C.

How much money do pro team owners/investors rake in?

Wow.

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BD Invictus

I don’t pay for tv anymore for about ten years now, Hank.
Twitghanistan, if you know how to use it, is very informative. So milk social media, lol.
I catch some of the cable shows on internet after they air or much later after they end up on dvd (borrow from my local library collection–get a card, like me).

Happy Holidays All!

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Ted Jenkin @ Your Smart Money Moves

Here’s the practical advice for the people living the lifestyles of the rich and famous. The main flaw in your thinking is that the income level you are making now must continue in perpetuity. I’m here to tell you it can’t and it won’t forever. Somewhere along the way you’ll hit a dip, a patch, or a gap that will put a dent in your lifestyle. If you don’t plan prudently, your neighbors, work colleagues, and others simply won’t be able to bail you out.

There is a famous saying that says there is no I in TEAM. Michael Jordan followed up that quote by saying, “but there is I in WIN”. The way you win in this game to realize the people around you are doing what they shouldn’t be doing which is spending all or most of what they make. They have a lot of stuff but not the stuff that counts. Be prudent and enjoy a few tastes of the good life and as my first boss said to me, “bank like a bunny” because you won’t make hay forever. Real security comes from what you have in the bank not from who you owe.

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BD Invictus

Only the truly rich, the top 1-2%, enjoy the “Air Up There” (to borrow Jordan’s book title).

Even he got hated on as a golf course guest lately, some say it’s retaliation for Obama’s re-election, which is widespread.

People can do what they want to with their money.

You surely can’t take it with you.

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Veronica @ Pelican on Money

Hank, thanks for giving us your insights on this issue that I’ve only been able to touch on lightly in a previous post: http://www.bluepelicanloans.com/blog/ask-the-readers-what-could-you-not-live-without

I’ll have to edit it and include your post.

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AverageJoe

Great piece. When I was an advisor, I worked with one NFL player. A good friend worked with several. It was IMPOSSIBLE to get them to see the future. They’re raking in money and can’t believe that one day (very, very soon) it’ll be over. They’re making soe of the world’s dumbest money decisions because they think they’re superhuman.

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The College Investor

I saw a show about how the NFL is trying to give their players some personal finance classes and other resources to help them since this is becoming so commonplace. In fact, Clark Howard had a special about it as well.

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Christopher @ This that and the MBA

They just need to jump on the internet and read your site…

It is sad to go from so much to so little as so many athletes do. It is also the same case for anyone really though, they want to give pro athletes financial education but they dont even really give the average person any financial real life education…you are kind of toss into life and meant to figure it out on your own…

I can understand spanish and physics but coming out of high school didnt really understand balancing a checkbook…

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Jerry Wallace

Well one way I am saving money is getting my own devices to fix my car and maintain it. I just got a pressure monitoring system for my tires on my car.

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CookeShai

Unfortunately, a lot of these pro athletes live the rich and famous lifestyle , they splurge their money on things that are not really important. They fail to realize the popularity is not permanent and before they know it, their bank accounts were already drained.

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Mary Kaplan

Spending beyond our means is really a problem rampant in the United States. I think the ease of obtaining credit cards only exacerbates the problem. Our two kids are in college and we receive credit card applications for them on a daily basis. Thank goodness I am able to rip them up and throw them in the trash. Being cognizant of what you can afford and sticking to the budget is critical to having a prosperous life.

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