“I spent 90 percent of my money on women, drink and fast cars. The rest I wasted.” — Manchester United and Irish soccer legend George Best
Some staggering stats from Sports Illustrated on the topic of professional athletes and their money:
- By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.
- Within five years of retirement, an estimated 60% of former NBA players are broke.
Last year I watched ESPN’s 30 for 30 series documentary “Broke,” that looked at how athletes usually end up blowing through millions of dollars and losing all of their money.
Here are a few quotes from the doc:
“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.” – Keith McCants
“I guarantee you, I spent a million dollars on jewelry.” – Andre Rison
“There was probably, different times [I was taking care of] 25, 50 families.” – Bernie Kosar
Some of it was the fact that young men who thought they were invincible figured they could spend as much as they wanted and just make more money in the future.
Others were led astray by horrible financial advisors and business partners.
Many were stuck taking care of multiple friends and family members or their entourage.
Most people assume that once you make millions of dollars life is easy. And obviously, having that much money can solve a lot of problems that most normal people have to deal with. But it doesn’t mean that there aren’t other stresses in life just because you have money.
SI’s Michael Rosenberg had this to say after Patriot’s tight end Aaron Hernandez was charged with homicide this past summer:
Athletes sign multimillion-dollar contracts, and we say they are “set for life.” Nobody is set for life. You might have enough money to last the rest of your life. But you still have to figure out how to live.
Since the news outlets mostly focus on the negative stories I was surprised to see an article this week about a professional athlete taking control of his finances.
Michael Carter-Williams, a rookie with the Philadelphia 76ers, is being responsible with his money. His parents are setting up a trust so he can’t blow all of his earnings in the first few years. From CBS Sports:
Nowadays, Carter-Zegarowski and her best friend, Tracie Tracy, are running his management team. They are taking a proactive approach to make sure he doesn’t spend all his money in a couple of years.
His rookie contract guarantees him $4.5 million over his first two seasons. He could make a total of $10 million if the Sixers pick up the final two seasons of his contract.
But his salary is deposited into a trust he can’t touch for three years. Carter-Williams is living off endorsement deals with Nike and Panini trading cards.
Good for him. Hopefully the trend will continue as the newer players see what has happened to their peers in the past.
I read somewhere that Jay Leno has never spent a dime of his earnings from The Tonight Show (he makes something like $30 million a year) and only uses the money he earns from doing stand-up gigs for spending purposes.
This seems like a good strategy for professional athletes to follow.
My advice for professional athletes that have a short shelf life in terms of their career while making lots of money in a short time frame would be:
- Save at least 50% of your income and never touch it during your career.
- Don’t take care of all of your friends and family. Buy a few nice gifts and let them provide for themselves going forward.
- Don’t assume that becoming rich means you are a good investor.
- Don’t invest in restaurants, bars, car washes or any other business that gets pitched as a “sure thing.”
- Owning a bunch of assets is different than owning a diversified portfolio of investments.
- Find a reputable financial advisor with plenty of references that will look out for your long term well-being.
- Don’t take on huge debt loads.
- Living below your means is very achievable when you make millions of dollars.
- Keep your life style inflation under control.
- Your body doesn’t stay young forever. Plan ahead for a second act.
Author’s note: If there are any professional athletes reading this post, I am available to be your financial advisor.
How (and why) athletes go broker (SI)
12 outrageous quotes from ESPN’s documentary on athletes going broke (Business Insider)
Michael Carter-Williams has put his rookie salary in a trust fund (CBS)
Hernandez’s arrest a sad chapter in a checkered history (SI)