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The average professional athlete in the U.S. will make more in one season than most of us earn in our entire lives….[yet,] despite those staggering salaries, 78% of NFL players, 60% of NBA players and a very large percentage of MLB players (4x that of the average U.S. citizen) file bankruptcy within five years of retirement.@Your Finances
This article consists of edited excerpts from the original article by Chris Preston to provide you with a 40% FASTER – and EASIER – read.
[Let’s take a look at] 5 possible reasons why the average athlete is destined to go (quickly) from fame to shame. (Data from Mint.com)
1 – Overspending
Scott Bercu, a financial accountant for professional athletes, believes this group spends like mad, and blows their savings too rapidly. He said, “They see their salaries as infinite, like it doesn’t end, like they can’t spend it all but if you get $5 million a year, by the time you get done paying your agent and taxes, you have $2 million left to spend.”
2 – Career duration
The average career span in the NBA, MLB and NFL is 4.8, 5.6 and 3.5 years, respectively.
The “shelf life” of athletes is tiny. Professionals in this industry have a small window to make their millions, and if they don’t they cannot survive on their savings for very long (even if they saved responsibly).
3 – A lack of finance knowledge
Ed Butowsky of Chapwood Capital Investment Management believes athletes don’t understand finances. He says the leagues try to help educate them, but the system doesn’t work well enough.
Athletes see prominent people spending money, and they believe that their spending pattern should be the same. However, athletes fail to take into account that those prominent members have spent a lifetime learning about financial responsibility and budget strategies.
4 – Poor investment decisions
Also, according to Butowsky, athletes are targets for poor investment pitches. He said, “Chronic over-allocation into real estate and bad private equity is the number one problem in terms of a financial meltdown. I’ve never seen more people come to me about raising money for those kinds of deals than athletes.”
5 – Hangin’ with a bad crowd
Athletes often do try to be responsible with their savings. However, they pick the wrong financial advisors. The NFL Players Association claimed that 78 players lost a total of $42 million between 1999 and 2002 as a result of bad financial advisors. In fact, Bob Young – managing director for APEX Wealth Management – says athletes often don’t know who manages their savings. He said that he frequently asks players how they’re doing (financially), and they’ll often respond, “I have no idea. All the bills are paid by someone else.”
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A few quick thoughts of my own[It is very disconcerting] if the NFL and NBA data is correct. That’s a high rate of bankruptcy, and the leagues should provide better guidance for its athletes….[Unfortunately,] professional athletes are easy targets. They are highly visible, have lots of money and limited experience.
…Before pointing the finger at athletes, it may be wise to step into their shoes (cleats) for a minute … maybe their financial woes aren’t entirely their fault or a result of reckless spending.
[Some examples of athletes who went bankrupts (Source):
1. Johnny Unitas
One of the NFL’s first truly great quarterbacks, Colts legend Johnny Unitas didn’t experience the type of success he would have liked to in the business world. Unitas had a number of business failures, which included a series of bowling alleys that never took off and a print-circuit-board company that flopped. The three-time NFL MVP was forced to file for bankruptcy in 1991.
2. Antoine Walker
Former NBA star Antoine Walker made $108 million during his playing days but was forced to file for bankruptcy in 2010. Walker lost his vast fortune through spending, gambling, an ugly divorce and legal troubles.
3. Lawrence Taylor
Perhaps the greatest defensive player in NFL history, the business world has not been kind to former New York Giants linebacker Lawrence Taylor. After his retirement, Taylor made a series of poor investments and was even defrauded in a penny stock scheme. In 1997, he pleaded guilty to tax evasion and was sentenced to three months of house arrest, five years of probation and 500 hours of community service.
4. Lenny Dykstra
Well after his playing career was over, former Phillies and Mets outfielder Lenny Dykstra founded a high-end jet charter company and magazine marketed to professional athletes called the “Players Club.” The company was a complete flop, and Dykstra was forced to file for bankruptcy in 2009. Later it was revealed that Dykstra also committed fraud, and the former MLB All-Star was given a three-year prison sentence in 2012.
5. Bill Buckner
Bill Buckner’s run of bad luck didn’t end with his infamous blunder in Game 6 of the 1986 World Series. After his playing career in MLB ended, the former All-Star first baseman went broke from investing in a car dealership that closed just two years after it opened.
6. Vince Young
Despite gracing the cover of “Madden NFL 08,” former Titans quarterback Vince Young squandered the $34 million he made as a pro football player (plus another $30 million from endorsements) in just a few short years. Young did so by spending the majority of his earnings and having a falling out with a financial planner, whom he alleged misappropriated $5.5 million of his money. The former BCS National Championship winner filed for bankruptcy in 2014.]
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