"It’s the same old story,
same old song and dance my friend'
Tom Leach, the voice of the University of Kentucky Wildcats, gave me a fascinating Sports Illustrated article entitled, How (and Why) Athletes Go Broke.
To quote baseball legend Yogi Berra, it is “Déjà vu all over again.
As a structured settlement consultant, I have worked with injury victims, lottery winners and others who receive very large sums of money. It’s been said that 90% of them will run through their money in five years or less. I've seen people blow money in more ways than you can think.
Even knowing that, I was still stunned to learn that within TWO years of retirement, 78% of NFL football players are bankrupt or under financial stress.
60% of NBA basketball players are broke within five years of retirement.
I was under the impression that professional athletes had wonderful support systems of agents, advisers and strong unions. I guess not. They are running through their money faster than a crazed lottery winner.
Powerball winner Jack Whitaker was robbed of $600,000 in a strip club. Cash. It seems like a lot of pro sports stars are following his spending philosophies.
Why are people so compelled to blow big money?
I sometimes feel like a substance abuse or weight loss counselor. I know many people I try to help will fail, but I keep focused on the success stories.
Like in the movie Carlito's Way, friends and family often are the reason many people go down.
My father often said (and I often repeat) that "If you tell me who your friends are, I will tell you who you are."
The Sports Illustrated article said that the downfall of many pro athletes are the people who are advising them and hanging out with them.
You can't choose your "friends" by their ability to serve as your Yes-men. In fact, a true friend will tell you when you are screwing up. You need friends who like you for who you are, not for your wallet.
Professional sports figures attract flunkies for many reasons. Society has a big attraction to celebrities. Someone needs to tell sports figures that if a person REALLY wants to be your friend, he doesn't need to be on your payroll.
I have many friends. But none of them get paid for that “privilege.”
Sports stars also get caught in the same trap that others with big money fall into. They think the money is going to last forever. Someone who gets a lottery jackpot or injury settlement is only going to get it once. As I told one injury victim, "You are only going to get hit by a truck once in your lifetime. You need to make sure that this money is there for all your lifetime."
Sports stars often think they will play forever, but the average career of an NFL player is only four years. The careers end, the money runs out and they are not prepared for the sudden fall.
Sports stars often have an attraction for risk. A young, professional athlete is the epitome of self-confidence. Those who make it to the professional ranks were probably stars in grade school, high school and college. They have never had anything go wrong in their entire lives.
Until they start investing big money.
Overconfidence is an affliction that plagues many on Wall Street. It is the primary reason we are in an economic crisis. The problem is even worse for sports stars since they generally don't have the education and experience that the Wall Street crowd has.
When overconfidence is combined with lack of knowledge, disaster strikes.
I would tell a professional athlete the same thing that I would tell anyone with big money.
Plan on the money you have lasting for the rest of your lifetime. Assume you’ll never get another nickel. Dump all the "friends" and hangers-on. Don't be spending to keep up with the Joneses. (I like the Dave Ramsey line: "Don't spend money you don't have to impress people you don't know.")
I try to have lottery winners and injured people keep quiet about their finances. Since that’s impossible for sports stars, they need to take special care in choosing who will financially advise them.
Stars need advisers who have worked with others in their situation and income class. They need advisers who don't "learn why they earn" at the star's expense.
If they develop and stick to a sound financial game plan, they can avoid being another "same old story."