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The Oft-Mismanaged Finances of Athletes and Superstars and What We Can Learn From Them

While most of us are already familiar with the basics of personal finance, it might surprise you to know how some of the richest people in the world have no idea on how to handle their money and how to make it grow. If you still haven’t had a chance to watch ESPN’s 30 for 30 “Broke” I strongly advise you to watch it as soon as you can as it provides an interesting insight into how NBA players mismanage their finances by focusing on the “right now” instead of the long term and typically end up spending all their money on parties, cars, jewels and mansions without thinking of the future. This amazing documentary threw out a mind-blowing statistic that said that almost 60% of NBA players declare bankruptcy within five years of retirement. As if this wasn’t shocking enough, it was also very surprising to find that this figures rises to almost 80% when it comes to NFL players.

But what is it about NFL players that makes it much more likely to go broke just five years after retirement? Well, for starters, an NFL player’s career is typically much shorter than the career of an NBA player. While an NBA player can expect to play for about 5 years in the league, the average NFL player usually lasts a bit over 3 years in the league. In fact, NFL players have the shorter careers when compared with the other major leagues; MLB players average 5.6 years in the league, while NHL players typically last 5.5 years.

One of the major factors when it comes to figuring out how long a player’s career will be is injuries and how these injuries are treated. NFL players are without a doubt the most vulnerable when it comes to developing and suffering career-ending injuries despite the fact that their season is relatively short when compared to other major sports. NFL players are vulnerable to suffering injuries like ligament sprains, concussions, fractures, dislocations and even conditions that affect non-athletes like carpal tunnel syndrome; a painful condition in which the median nerve is compressed and causes pain and tingling in the wrist area.

When it comes to figuring out how someone making that much money (even if It is only for a few years) can go broke so quickly, we also need to consider the fact that most of these athletes have not taken a personal finance course, and therefore they have no idea on how to make their money work for them. Unfortunately, while this is something that could be easily thought in high school, most schools in the country do not offer personal finance classes, thinking that students will eventually get the hang of it on their own. And while this is sometimes true, it is easy to see how someone could easily mismanage their funds after coming into a lot of money so suddenly.

On the bright side, it is also good to know that player’s associations and the leagues themselves are making efforts to teach their players the basics of personal finance; the NFL offers its players a free seminar on financial education that talks to players about insurance, funds management, investment and other topics. Unfortunately, while education –especially financial education- continues to be overlooked by schools and athletes themselves, it will be very difficult to correct this statistic. Ultimately, the topic of financial education should be the responsibility of the athletes themselves, and while many athletes do go on to have successful ventures outside of sports after their retirement, this tends to be the exception to the rule on most cases.

 

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