Daily Finance has an eye-opening article, 10 Star Athletes Who Excelled at Losing Millions. Among them: Sheryl Swoops, a WNBA star with $750,000 in debts; Michael Vick, an NFL quarterback who still owes $19 million from his bankruptcy; and Mike Tyson, a former heavyweight boxer who blew through $400 million. How did these people end up broke after making so much money?
The answer is quite simple. Star athletes fall prey to the same vices as regular folk, just on a much larger scale. Instead of blowing $400 at a casino, they may gamble away $400,000. Instead of financing a $30,000 car, they buy a $100,000 one. Instead of their houses being too big by 1,000 square feet and 1 bathroom, they’re too big by 6,000 square feet and 7 bathrooms. And they get divorced just like we do, losing the same proportion of their assets.
No matter your income, it’s easy to live beyond your means. Just because you bring in $6 million a year doesn’t mean you’re necessarily better off than someone making $60,000 a year. If you make $6 million and spend $6.1 million, you’re worse off than if you make $60,000 but only spend $45,000 and invest the rest. The biggest determinant of whether you will end up in debt is how you manage your finances.
Do you make a budget and keep it up to date? If so, do you stick to it month after month? Do you set aside money each month for emergencies? Do you save at least 10% of your income for retirement? Do you minimize impulse purchases? Do you look for ways to reduce your monthly bills and expenses? If you can answer “yes” to most or all of these questions, you’re likely on the right path financially.
When we think of star athletes, we don’t often think of their debt or other financial troubles. The reality is, it happens more often than not:
78% of NFL players go bankrupt or nearly broke just two years into retirement, according to Sports Illustrated. Among NBA veterans, 60% fall into the same predicament after five years.
Part of the problem is who these star athletes spend their time with. According to former NFL player Eugene Profit:
The whole idea of being invincible and ‘it’s never going to end’ kind of makes you have a much higher propensity to take risk. No one’s going to tell you no because they want to stay in your entourage or circle.
So this feeling of invincibility leads to greater risk taking. My opinion: Testosterone likely plays a role here, which is why 9 out of the 10 athletes listed in the article are male. Instead of surrounding themselves with others who encourage these athletes to spend themselves silly, they can seek out friends who are more of a positive influence.
Star athletes are people too. Like us, they make mistakes. Like us, they can be tempted to overspend. But they can learn to control that spending, just like us.