Here are the real reasons why athletes go broke!
The biggest and most important reason just might surprise you!
10 - The Joneses Nothing gets you broke faster than making
financial decisions based on what other people think.
Most athletes struggle to understand this and a lot of them eventually end up learning
the lesson the hard way.
Athletes are in the spotlight and they want to be a trendsetter.
And because so many guys do it, the pressure of owning several cars, homes, and designer
clothing is high.
But it doesn’t mean they have to!
Athletes not thinking long term can easily blow through millions.
Especially since most athletes accumulate a lot of cash early in their lives, and don’t
have a career after their playing days.
Athletes need to realize that unlike other people, their careers are short-lived.
The cash flow they’re used to doesn’t continue as long as they think it does.
The average basketball career is less than five years while the average football career
is even shorter at three years or less.
Another crazy fact is that 60% of NBA players are broke within five years of retirement
and nearly 80% of NFL players have little savings left within two years of retirement.
On the flip side, most athletes should take Adonal Foyle as an example.
Although he wasn’t a star in the NBA, he still made over 63 million dollars during
his 13-year career!
Even when he became a multi-millionaire, he always maintained his strict financial discipline.
For example, he only bought used cars and never took the big depreciation hit on new
cars.
Foyle never adopted the carefree spending lifestyle of his peers.
Instead, he learned from their mistakes and controlled his spending, even cutting out
$4 coffees for a while midway through his career and brewing coffee at home!
9 - Mismanagement Imagine if the person who’s supposed to
help you make more money actually has no clue what they’re doing?
That’s the story of William “Tank” Black, one of the most notorious agents in sports
history.
He was kinda the Bernie Madoff of sports!
Black was originally a South Carolina assistant football coach.
He started Professional Management Incorporated and quickly used his football connections
and charisma to become one of the most successful football agents of his time.
Let’s take former running back Fred Taylor as a quick example.
Taylor was the Jaguars' first-round pick in 1998, and one of Tank Black’s premier clients.
He invested Taylor’s money, along with a lot of other players, in a ponzi scheme in
the late 90s!
Tank Black lost $3.6 million of Taylor's money alone!
Investing in a ponzi scheme by accident is just one example of dumb things Tank Black
did with money.
But he was extremely charismatic, and that’s why players trusted his judgement.
In fact, Taylor was so close to Tank Black that he started calling him "Pops”.
He represented well over 50 NFL players at his peak.
In 1999, he signed a record five first-round draft picks in the NFL, in addition to 3 second
round draft picks.
Tank Black ended up in prison because of money laundering and stock fraud.
He lost millions of dollars for his clients.
At first, Taylor defended Black.
But soon he found himself at a bank, applying for a $100,000 loan just so he could get through
the 2001 offseason.
He was barely scraping by because he chose the wrong person to invest his money! Taylor
later admitted he nearly retired from football because of all the stress.
For what it’s worth, Black did win a civil suit the SEC filed against him alleging that
he cheated clients.
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8 - Kid Problems Wait what?!
Too many kids is on this list?!
Well, first of all, kids are expensive in general.
The average cost of raising a child from birth to the age of 18 is roughly around 234 thousand
dollars!
However, raising the kids themselves are something that most professional athletes can afford,
even if they have something like 10 of them.
But that’s only if you’re taking care of the kid yourself, so you have the ability
to choose how much to spend.
What I’m really talking about here is child support.
And we know that child support isn’t cheap.
Especially in states where child support is a percentage of income.
Let’s take Travis Henry as an extreme example.
Henry was a former NFL running back who played for three teams from 2001 to 2007.
He has nine children, EACH by a different mother, and some of his kids were born just
a few months apart!
Henry eventually went broke because his career fell apart.
And because he didn’t save his money, he couldn’t pay his child support.
A more recent example is with Blake Griffin.
He was ordered by the Los Angeles superior court to pay 258 thousand dollars a MONTH
in child support!
Does that sound insane for a judge to rule that or is that just me?
So yes, not having unplanned kids IS a financial strategy.
7 - Uncle Sam Professional athletes and tax problems: it’s
a recurring theme.
Examples include Manny Pacquaio, Lionel Messi, and Cristiano Ronaldo.
But why does it keep happening?
One reason is the lack of knowledge with taxes.
Younger athletes are often making a lot more money than people their age.
A 25-year-old making $50,000 working in an office is going to have an easier time with
taxes than a 25-year-old professional athlete making millions of dollars a year.
That professional athlete is also very likely surrounded by people who don’t have his
best interests in mind.
Another reason is forgetting to withhold money for their additional income, such as endorsements
and personal appearances.
Some athletes simply forget that they have to pay taxes on extra money and they don’t
withhold any of it!
Also, state taxes gets really complicated as far as how and where players get taxed.
For example, NFL players don’t just pay state taxes where they live.
They pay where they play and, most notably, where they practice!
This is the so-called Jock Tax in action.
An athlete who doesn’t have a knowledgeable tax advisor can easily get into trouble and
have to pay fines and back taxes.
6 - Bad “investments” Despite their high salaries, many professional
athletes burn through their nest egg, often before hitting retirement.
One of the most common mistakes they make is putting money into bad businesses or investments
that never had a chance.
Former NFL player Rocket Ismail lost $300,000 dollars investing in a Hard Rock Café knock-off.
The restaurant was supposed to be called Rock N Roll Cafe.
Former star baseball player Torii Hunter said he invested $70,000 in an inflatable raft
invention.
Apparently the pitch was that when high-rainfall areas were flooded, consumers could pump up
the device and allow their furniture to stay dry.
Seriously.
He actually invested money in that!
Former NBA forward Vin Baker thought that he was getting into a safe investment by starting
a seafood restaurant.
But the restaurant was foreclosed on after nearly 900,000 dollars in unpaid loans!
Former pitcher Curt Schilling famously lost millions of dollars in 38 studios, a video
game company he started.
And the list of bad investments that athletes get into go on and on.
The lesson here is that business is tough.
However, a lot of times, the ideas are just bad from the get-go.
5 - Too much house Players love putting money into their house.
Chronic over-allocation into real estate and bad private equity is the number one problem
for athletes in terms of a financial meltdown.
I’m not talking about just buying regular houses as an investment to flip, or buying
commercial real estate to rent to businesses.
I’m talking about buying too much house that they can’t afford to live in.
Instead of paying in cash, athletes will take out a mortgage for the house.
And yes, sometimes it does make sense to take advantage of low rates and use the cash for
a better investment opportunity.
But that’s a whole different argument!
Some examples of athletes who had to foreclose their homes at some point include Jose Canseco,
Antoine Walker, and Allen Iverson.
The problem with athletes buying too much real estate is that when they get into trouble,
they have a hard time selling the house, even when it’s at what’s considered a bargain
price.
That’s because of the high price of the homes athletes buy.
A house is a very illiquid asset, especially when it’s worth multi-million dollars.
Athletes typically put in crazy stuff that most people don’t want.
Whatever expensive custom made additions they put in the house typically won’t reflect
back in the sales price.
4 - Entourage It’s often made up of close friends and
family members.
But does the entourage actually make sense for an athlete?
Athletes and agents say a support system can be a necessity.
And that’s true.
Athletes are constantly asked for money.
Mundane tasks such as going to the supermarket can be a challenge for someone ultra famous.
So it definitely makes sense to have a personal assistant, or maybe even two.
But honestly, no one needs 50 people hanging around helping them navigate everyday life.
Unless they’re helping to run a business, the only thing an entourage that big is good
at is spending an athlete’s money.
Business is business, and friends are friends.
Athletes that blindly give away money to someone they grew up with isn’t doing their friends
a favor, nor themselves.
Oscar de la Hoya saved nearly $400,000 dollars a year in food, housing, and travel expenses
after dropping 10 entourage members mostly made of good friends.
Allen Iverson used to roll with a crew of up to FIFTY people! Mike Tyson used to have
a payroll that had almost two hundred people!
Find out some more of the crazy ways Mike Tyson blew through 400 million dollars by
watching our video here!
In reality, no one needs to buy their friends, no matter how rich they are.
3 - Bad partners Athletes today have to be very careful whom
they marry because they can end up losing most of their hard-earned money if they choose
the wrong spouse.
Divorce is expensive, and this is an issue even the average Joe deals with!
Sometimes it’s the athlete’s own fault.
That was the case with Michael Jordan and Tiger Woods.
Tiger ended up paying over 100 million dollars to his ex-wife because of his infidelities.
And Michael gave up over 168 million dollars to his ex-wife Juanita!
But athletes can have bad partners in the financial sense even if they don’t get a
divorce.
Both people have to be on the same page when it comes to finances.
Once you get married, you get married to everything.
And that everything includes spending habits and debts.
It’s not that we’re against marriage here, but if you’re gonna get married, make sure
you want to do it and make sure it’s to the right person!
2 - Life Choices Some athletes are champions on the field,
but some of them are also champions at just making plain DUMB life decisions.
These bad decisions basically just show their attitude towards money.
We’re not against spending money, because at the end of the day, what’s the point
of being rich?
But we’re against not getting the proper value for each dollar you spend!
For example, ex NFL player Vince Young once had to fly from Nashville to Houston.
He didn't want to deal with a bunch of crying babies and just people in general, so he bought
up every seat on the plane.
Yep, there were 120 seats and he bought them all, very likely paying as much as $22,000
for ONE flight.
He didn’t even get the benefits of flying private!
And let’s not forget the time he dropped $15,000 dollars for ONE meal at the Cheesecake
Factory!
What’s the most expensive item on the menu?!
Ex NBA player Gilbert Arenas spent a million dollars on his pool and shark tank.
Nope, he didn’t get that money back when it was time to sell the house!
Ex-Knick Eddy Curry once had a thousand dollar a month cable bill!
The examples are literally endless.
All this stuff is only what’s made public!
There’s most likely way dumber stuff out there that we just don’t know about.
1 - The Biggest Reason And what exactly IS the biggest reason athletes
go broke?Spending more money than they make is easily THE number one reason why athletes
– and anyone else – go broke.
If you want to get ahead, spending less than you earn is the most important financial law
to understand and live by.
You have to keep what you earn.
You want to let money work for you once you get rich, instead of the other way around.
When you spend less than you earn, you’re no longer playing catch up and living paycheck
to paycheck.
All the stress that comes from living paycheck to paycheck can be paralyzing.
And yes, as crazy as it sounds, plenty of professional athletes live paycheck to paycheck.
And that’s the #1 reason why athletes go broke, they spend more than they make!
Once they started making big money, their lifestyles got even bigger!
Watch this next video to find out how Mike Tyson blew through 400 million dollars!