Pro athletes are frequently chastised for earning far too much money. However, a surprising number are not at the top of their game regarding wealth management. But did you know more NFL players reach bankruptcy before NBA players?
According to a Sports Illustrated article from 2009, 60% of former NBA players are bankrupt within five years of retirement. 78% of former NFL players have gone bankrupt or are in financial distress after two years of retirement.
Big Money, Big Spendings
Many of the athletes who are out of money are big spenders. They make the mistake of matching their spending level to their maximum earnings or beyond. When those earnings cease, the payments on houses, cars, and a lavish lifestyle continue, and the athletes face financial ruin.
Long-term money management is incompatible with the accumulation of stuff. Billionaire Warren Buffett is perhaps as well known for his modest lifestyle as his wealth. Glover Quin, an NFL player, had been driving the same SUV for several years.
I never had a Bentley. I never had a Maserati, My wife and I lived well. We just didn’t live extravagantly.
Glover Quin, NFL Player
Athletes don’t spend all of their money on material luxuries. It’s also simple for players to turn into cash machines for family and friends who need help or are aspiring entrepreneurs.
There’s a pressure that comes with being the African-American success story, you are some community’s pride and joy. And that community has protected you. That community has given you free haircuts when you couldn’t afford it. That community has sponsored your football teams, your basketball team.
Humble Lukanga, Wealth Manager
Even a multimillion-dollar salary can only get you so far. Young athletes with solid financial knowledge can budget to be generous with their community without jeopardizing them financially.
Maintain a budget-friendly lifestyle regardless of your income level. It will set you up for financial freedom and make it far easier to sleep at night when you are not concerned about the next paycheck. (Source: Investopedia)
Great Athletes and Wise Financial Decisions
There are numerous examples of legendary athletes who have achieved long-term financial success. Michael Jordan, the richest athlete of all time, amassed a $2.1 billion fortune through NBA earnings, sponsorships, and investments, including a majority stake in the Charlotte Hornets.
Magic Johnson Enterprises was founded by NBA player Earvin Magic Johnson years before he retired and has grown into a $1 billion conglomerate. Serena Williams has won the most Grand Slams and four Olympic gold medals of any player. Her career prize money made her the second highest-paid female athlete, and she’s put it to good use in various business ventures and her venture capital firm, Serena Ventures. (Source: Investopedia)
Big Money and Short Careers
Pro athletes have very short careers in comparison to the majority of people. A player’s career can be cut short unexpectedly if his or her contract is not renewed or if he or she is injured.
So, even at a young age, players must engage in sophisticated financial planning and investing to ensure their early earnings last a lifetime. (Source: Investopedia)
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