There aren’t many job opportunities that allow you to drop out of college and make hundreds of thousands, if not millions of dollars, for playing a sport you love. It seems as if professional athletes should be set for life, but unfortunately many make costly financial mistakes that are hard to recover from.
According to the National Bureau Economic Research one in six players file for bankruptcy, most within 12 years of retiring from playing. According to an article published in Sports Illustrated, after NFL players have been retired for two years, 78% are facing financial strain due to unemployment or divorce. Within 5 years of retiring 60% of NBA players are also broke.
To avoid the same outcome, here are 6 lessons we can learn from the way professional athletes spend their money.
Call Wise and Smart Investment Plays
Professional athletes come into this money all at once and invest their money without correctly looking into the investment. The safe investments, like stocks and bonds, aren’t interesting to them. Instead they invest in nightclubs, car dealerships, inventions and T-shirt companies. Not that investments in these areas is bad, they just haven’t done their research to ensure they are making a wise investment.
Avoid Passing the Ball to The Other Team
Everyone knows exactly how much money these athletes are signing for and their yearly salary. Because of that, athletes become easy prey for those looking to get rich off their money. Many people start offering to help them “manage their money.” They start doing business with a friend of a friend, or someone’s relative, who isn’t trustworthy. They don’t look closely into business deals or investments because of who the person knows.
Don’t Assume the Win Before the Clock Ends
Most of these players have a laundry list of things they want to buy as soon as they start getting paid. The millions of dollars seems too much money to blow through, so they don’t make wise decisions. Before they know it, the cars, homes, furniture, entertainment, jewelry and other items have wiped out their bank account.
Have a Conservative Game Plan for Your Family
Not only are athletes worried about changing their own circumstances, but they take care of their family as well. Some buy their parents new house, new cars, furniture, or pay off debt of relatives or close friends. Not to mention the trips and other miscellaneous expenses that quickly drains the money. Taking care of family members is a nice gesture, but you can do it conservatively.
Don’t Be Tackled By Taxes
Let’s say an athlete is signed for $5 million. The government immediately takes almost half of that amount. Many people fall into this same trap. They see their starting salary, but forget to factor in the actual take home amount is less than what you originally thought. This means people end up spending more than they have because they simply forget about the governments share. This will make for a tighter budget than originally thought. Don’t forget about taxes.
Drill Financial Lessons With Your Children
When these athletes are signed, they are typically right out of high school or only have a few years of college under their belt. NFL agent Leigh Steinberg said, “Coming off college scholarships, they probably haven’t even learned the basics of budgeting or keeping receipts.” Not having learned these skills makes for poor decisions and spending money quicker than they should. Don’t set your kids up for failure. Take the time to teach children basic financial skills to enable them to make correct financial choices.
Learn From the Mistakes of the Professionals Athletes
We don’t all have to make these mistakes to learn from them. Instead, learn from the professional athletes before you make these mistakes. Financial mistakes happen so quickly, but take a long time to recover from. By watching the “pros” and learning from the mistakes they make you can better ensure you save yourself from the same hardships.