The sports industry in general is fascinating to me. It is fascinating that the NFL was considered a charity before 2015 and had profits in the billions. It’s also interesting that when any sport is broken down it is literally a bunch of millionaires playing sports. But the most interesting and disappointing aspect is that a professional athlete will make millions of dollars and can end up broke all in the span of 10 years. There are lessons to be learned here.
My favorite two sports are NFL and NBA so I will be sticking on the topic for those areas. But do not let that give you the impression that other sport athletes don’t file for bankruptcy just as much. Here are the facts according to Forbes.
- 78% of NFL players go bankrupt or under financial stress in 2 -5 years after retirement. Average salary currently is 1.9 million in 2013.
- 60% of NBA players go bankrupt or under financial stress in 2 -5 years after retirement. Average salary in 2013 was 5.15 million.
Every reason that I list below is no dig at any current/future/past sport athletes. I understand that it is tough having a massive increase of salary at once and it can get the best of us. Biggie wasn’t lying when he said more money more problems.
Here are my top lessons that we can learn from athletes going broke
Squash the Competitive Attitude
My father was a football player for the UF Gators back in the day. Why do I bring that up? Well my father also told me that football players, such as himself, are very competitive. That competitiveness goes on the field and off the field into daily life. It becomes a matter of needing to beat others in material items such as a home, car, jewelry, clothes and more. That type of money spending is more familiarly known as “keeping up with the Joneses” or Kardashians for millennials.
Athletes are not the only people who are competitive by nature though. I find myself being competitive with my friends in life but it can lead to financial distress. Trying to keep up with friends is an expensive habit and beating them in spending is only adding to the problem. Life is not a competition no matter how we may see it; lets start supporting each other in life. No need to purchase a 2017 vehicle because your friend only has a 2016. No need to buy a larger home to show off. Concentrate on your own wallet and not the lives that others portray.
Within Below Your Means
This is a common problem for anyone at any stage of life and usually leads to a reality check or bankruptcy at some point. Athletes for the most part actually live within their means. I mean they literally make an average salary of $5 million so it’s truly hard to live outside of your means, but I digress. For athletes living within their means is very acceptable. The problem is the assets they invest in are not money producing assets and even an asset such as a home may not payoff in the long run.
Hence we come to the lesson of living BELOW your means. Having a money cushion is an overrated blessing that I use to take for granted. I can go on for hours on reasons to live below your means but the sake of time I will sum it up in two sentences.
Living below your means give you the extra money cushion you will need when something goes wrong. You can have it all but not at once.
Find & Listen to a Financial Advisor
If you remember one lesson remember this lesson. Hire a financial advisor with excellent recommendations, knowledge, and more importantly listen to them. Financial advisors can be your best friend or worst enemy. Listen to their advice, stick to the plan and check their plan. If you find your goals are not in the plan then it may be time to find another advisor.
Your current/future advisor is suppose to be in your corner at all times laying out a financial plan that will accomplish your goals. Deterring from the plan, such as buying a boat, will be a setback to the plan and your goals. Majority of athletes have some form of a financial advisor in their corner and majority of athletes will not follow the plan ahead of them. Learn from their mistakes and avoid setbacks to your future.
Find Smart Relationships
Quick lesson here and as an example I’m going to use Dwight Howard because he left the Orlando Magic and me. Before I get into the lesson this is not meant to encourage anyone to avoid marriage and kids, as they are a beautiful part of life. However, some relationships should be avoided. Dwight Howard has 8 children with 8 different women and pays thousands monthly for what could easily been avoided by cautious thinking.
Picking the wrong spouse is detrimental to your future in several ways. Years of hard work and asset accumulation can be split in two during a divorce plus attorney fees. Lesson to be learned is don’t rush into relationships and use rational thinking if the relationship is beneficial. Love takes time and making a kid doesn’t take much time at all.
Picking smart relationships stretch out to friendships as well. Friends can drag you down in levels and can raise you to higher levels. Avoid toxic relationships like a bad cough.
Avoid Supporting a Village
MC Hammer paid for all of his family and friends in their endeavors and we know how that went. Allen Iverson was known for partying too much and paying for other people to party. That as well did not turn out too well.
The obvious lesson here is to not over-exert yourself financially. I believe for most millennials it is easy now to say no because most of us don’t have extra cash laying around. But speaking for the future, you will continue to make more money and better financial decisions. At one point you will be able to lend money to others and not miss it so form the habit of not over exerting yourself.
Now the most important message here in between the lines is “time.” As humans our most precious asset is our time. It is forever being taken for us and we cannot purchase more of it no matter how much money you have. When family, friends and jobs ask for more of your time ask yourself if it is truly worth your time. Just as anyone going broke from giving too much money, anyone can be burnt out for giving too much time to others. Your time is precious, therefore act like it is your last and use it wisely.
Professional athletes have millions of dollars run through their hands in a short time span. It can be a blessing for a select few and curse for others. The lessons can be used for personal finances and help create positive money habits. My last lesson to readers is simple but an eye opener. That lesson is, anyone can go broke no matter how much money comes in your hands. Americans don’t have a saving problem we have a spending habit. Focus on nurturing good money habits so money problems are a thing of the past.
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