Multimillion-dollar deals, signing bonuses, and endorsements, are just some of the financial benefits for many professional athletes.
Unfortunately, many players go broke within years of retiring or while they are still playing.
With numerous deals and massive earnings throughout a player’s career, this leaves us wondering why and how professional athletes end up broke. Take a look below for just some of the ways that these players can lose their finances.
Statistics Over the Years
According to a 2018 report released by CNBC, approximately 60 percent of former National Basketball Association (NBA) players go broke within five years of retiring from the league.
Meanwhile, around 78 percent of National Football League (NFL) players experience the same within two years of departing the league.
Some of the most notable professional athletes who have suffered from these unfortunate circumstances include Allen Iverson, from the NBA, and Dennis Rodman who once played for the Chicago Bulls.
From the NFL, Raghib “Rocket” Ismael reportedly lost $20 million of his football earnings. Another player who succumbed to such financial woes is Vince Young, a former NFL player for the Tennessee Titans. Even former pro boxer Michael “Mike” Tyson was not spared, losing $300 million.
Reasons Why Professional Athletes Go Broke
They Retire Early
One of the primary reasons why their funds dwindle is that their earnings window is small. This is because their prime playing years are limited to their physical capabilities.
Once they retire, they have to manage the remainder of their earnings throughout their lifetime.
In corporate jobs and other similar traditional routes, individuals are normally given the chance to build their earnings over 30 to 50 years, while pro athletes are given far less.
Lack of Financial Knowledge
Another factor that comes into play is that many professional athletes lack financial knowledge. Although these professional athletes earn millions of dollars, managing their finances is a whole other ball game.
Many athletes are not trained nor well versed in financial planning, which is why they hire advisors and legal professionals to guide them.
Financial planners also tend to approach these athletes with the promise of better returns, only to engage in bad investments. While these professionals should play a role in helping you manage your finances, this should not stop you from overseeing and handling your financial affairs.
Not only will this give you a firmer grasp on the current financial matters, but it will also familiarize you with budgeting and long term planning.
Besides a lack of financial knowledge and advice, most players also succumb to the new lifestyle they have grown accustomed to. This leads athletes to spend more money on cars, houses, luxury holidays, and designer goods, without planning ahead.
Spending money on family and friends also takes a toll on their finances, with most relatives and even close friends taking advantage of their hard-earned cash.
This is the case with Allen Iverson. When Iverson was caught up in a series of legal and financial battles, those who benefitted from his generosity were quick to hide and run away.
While giving gifts and financial help to your loved ones isn’t a crime, it can cripple you financially.
The Bottom Line
As you can see, there has been a lot of discussion and debate surrounding professional athletes going broke.
Now that you know more about their financial experiences, you can try to avoid the same mistakes. Be sure to save money and live below (or within) your means.