Everyday we hear about an athlete filing for bankruptcy. A Sports Illustrated Report from 2009 stated that 78% of NFL players go bankrupt or experience major financial hardship after just two years of retirement, while 60% of NBA players go broke after a reported five years. Most people assume the reason these players lose all of their money is because of purely stupid decisions that the rest of us would easily sidestep. Sure, in some cases that sentiment may hold true, but the issue has many more layers. In fact, we can all take a lesson in financial decision-making from these athletes’ riches-to-rags stories.
Lesson One: Live Below Your Means
Like the lottery winner, these athletes seemingly get money tossed into their laps without warning, preparation or the proper guidance. I, myself, have never been handed a large sum of money, especially not one worth over a million dollars. But I can say this: when you’re young and receive money, you want to spend it. It’s a simple fact and oftentimes there’s nothing wrong with it – just don’t forget about your bills.
The difference between the average 20-22 year old and a professional player is that the pro isn’t spending $20 here and $100 there on bar expenses. No, the professional athlete is dishing out tens, if not hundreds of thousands of dollars on literally anything he or she can imagine. Guys end up blowing wads of cash on multiple cars, Rolexes, houses for themselves and family members, clothes, furniture, and so on. Some of these items may be purchased with the best intentions, but the other stuff is mostly for show.
So what does this mean for you? Don’t get caught up in measuring your success based off of material goods. For some, this means splurging on the dream house or car, while others like to indulge in smaller status symbols that quickly amount. Don’t think of your credit card as a safety net, and approach purchases with the mindset of addressing the true “needs” rather than spending excessively. For example:
• Do you truly need the latest smart phone technology if the model you currently own is in perfect operating condition? Be honest with yourself on whether you’re existence is lacking without the extra bells and whistles.
• What about your morning cup of jo? If you’re goal is to simply be more awake, do you need to splurge daily on that $6.00 latte from the café, or would an affordable but reliable coffee maker like this one from Cuisinart give you the same dose of caffeine?
• If what you need is a timepiece to tell you what hour it is, a simple yet well-constructed option like the Invicta watches found here will suffice; a blinged out alternative worth $10,000 isn’t going to be any more efficient at telling you it’s currently three o’clock.
The angle I’m getting at is remarkably simple, but often overlooked or cast aside: make reasonable, responsible purchases. Don’t buy things simply to keep up with the Jonses or just because you can.
Lesson Two: Be Thoughtful About Who Handles the Money
Another major problem among misguided professional athletes is that they allow their buddies to manage their finances – or even worse, they trust a friend of a friend who knows a guy that is an accountant. First of all, I wouldn’t trust my own mother to take care of my paychecks, so I certainly wouldn’t trust unqualified friends (no matter how close to me) to handle the millions of dollars I’ve worked my ass off for.
In a National Football League Players Association (NFLPA) study, altogether players lost more than $42 million between 1999 and 2002. It doesn’t matter your line of work; this should be a wakeup call. Never, I repeat NEVER, give someone the power over your money if he or she hasn’t shown demonstrated success in accounting or a similar financial background.
For the average person today, it’s never been easier to locate a capable advisor; just start by looking online and doing a little research using online resources and directories like Accountants World. On the other hand, all athletes have agents and fellow players who should be more than reliable in suggesting finance management professionals.
Before you make that next big financial decision, consider the true value of what you want to buy: think of the long-term gains versus the short-term desires. Do background research and place the appropriate people around you to facilitate a safe financial future.
Question: Would you be able to restrain yourself from blowing through a $5 million signing bonus?