Whenever Ben is out of town, like this past weekend, I get a chance to watch tv that I don’t normally get to watch. I love documentaries, and as I was browsing through Netflix I found one that combined my love of sports and money – ESPN’s 30 for 30: Broke.
It’s an amazing film spawned from a Sports Illustrated article that claims “60 percent of former NBA players are broke within five years of retirement. And by the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress.” The film has interviews with former superstar players like Andre Rison, Bernie Kosar, Keith McCants, and Curt Schilling You also hear from coaches, executives, reporters, and financial advisors who know the sport industry.
I loved the insight into the players’ mindset and circumstances that lead to their demise. NFL Linebacker Bart Scott made a great point that their situation directly reflects the lack of financial education and spending habits of society as a whole. I couldn’t agree more. Here are five money lessons that hold true for these athletes and the rest of us.
Plan for When Your Salary Ends
The salaries some of these guys received were crazy. Former MLB Outfielder Cliff Floyd was getting regular paychecks of $390,000. MLB great Ricky Henderson got a check for $1,000,000. In addition, they were in their early 20s, fresh out of college. I made stupid money mistakes in my early 20s without anywhere near that kind of cash; I can’t imagine what life would have been like with access to millions of dollars. Their main mistake, however, was not thinking about what happens when their paycheck would end. Despite the average NFL career lasting 3 ½ years, they thought the money would just keep rolling in. Many of us don’t do that kind of future planning either. We will “save for retirement tomorrow,” but that day never comes. And eventually it will be too late. This lack of planning and foresight will lead to a retirement crisis very similar to what these NFL players experience. Start thinking about your future and invest as much as you can.
Don’t Try to Keep Up With the Joneses
You’re 21 and can buy anything you want. What kinds of things would you spend your money on? The athletes bought four and five luxury cars, $30,000 earrings, and threw away thousands of dollars by “making it rain” $100 bills in a strip club. They did this all to keep up the rich athlete facade (even though some of them weren’t millionaires) and impress their teammates or people that they didn’t even know. And while you’re not spending that kind of money “keeping up with the Joneses” is a very real thing for people with normal incomes. We want the bigger house, nicer car, and newest gadget to put on an appearance of wealth that doesn’t really exists. Avoid getting caught up in that comparison. Be grateful for what you have and where you’re going.
Spend Wisely
Andre Rison would spend $10,000 to $15,000 a weekend, without knowing where his money went. Des Bryant, also in the NFL, picked up a $56,000 bill at a restaurant. Former NFL player and ESPN analyst Sean Salisbury spent $106,000 in a month without having anything to show for what he spent. While not on that level, many of us spend higher percentages of our income on toys, eating out, and other things that don’t add any value to our lives. Be conscious of your spending and think about how these purchases add to your net worth and your overall happiness.
Learn to Say No
One of the saddest parts for me was hearing the stories of how friends and family would take advantage of the athletes. They were expected to pay for dinners, support their entourage, and buy their parents a house. Soon they were over extended and couldn’t keep up with everything. I understand the desire to help when you’re in this situation, especially when you’ve come from poverty. I’ve even seen this happen in my own life when my mom received a large sum of money from my dad’s death. People came out of the woodwork asking for help. You have to realize that your money is limited, and you have to put yourself on solid financial footing first. Inevitably, that will lead you to saying no to helping someone else out.
Keep Your Investments Simple and Trust the Right People
So many people came to these athletes pitching the next great investment – night clubs, car dealership, restaurants and my favorite – the car wash. They would often invest in these enterprises with no prior research or experience, looking for the next big thing. Unfortunately, 90% of them never saw the money they invested again. For example, Curt Schilling lost $50 million in a failed video game business. They also trusted “advisors” who ended putting their own interest above the athletes’. Michael Vick had two advisors in a row that ended up ripping him off, one of which that went to jail for a ponzi scheme that she ran out of her house. For most of us, getting rich will happen slowly and steadily. Its crucial that you invest wisely and find an advisor that puts your interest above anything else.
If you haven’t seen this film, I highly recommend that you do. While we may not live their lavish lifestyle, we can learn from their money mistakes.