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60% of NBA Players Go Broke Within 5 Years of Retirement?
By JLP | April 9, 2008
Notice that the title is a question, not a statement.
AFM reader, Billy, sent me a link to a post from Le Basketball titled 60% of NBA Players Broke After 5 Years… The post is dated January 31, but this is the first time I have seen it.
The article states that the 60% stat is a rule-of-thumb so there’s no way of knowing just how accurate it really is. It seems rather sensational to me to use such a big number. But, even if the actual percentage was half that, it would still be too many in my opinion.
So, why do you think NBA players (maybe all sports figures for all I know) have such poor financial skills? I think it’s because they know how to play basketball but know very little about money. I think it’s also due to the fact that lots of kids get handed fat contracts before they are mature enough to handle themselves.
I found this paragraph from the article interesting:
Shaquille O’Neal of the Miami Heat was in the news recently with a court document representing his annual income as well as his annual and monthly spending. The “Diesel” pays $156,000 a month just in rent and mortgages on the various properties he owns or leases and another $1500 just for his cable TV bills! Of course Shaq is on another level than most other NBA players with the simple fact that he pulls in $20 million a year in salary but this still shows you a great example of the kind of money players are capable of spending.
I think it boils down to the fact that you can ALWAYS spend whatever you earn! I know as our family’s income has increased our lifestyle has increased along with it. The key is to keep the living standard increase BELOW the income increases.
My advice to NBA players:
1. Don’t buy ANYTHING until you have financial plan.
2. Consider your career, your business and hire people to run your business. LeBron James is a great example of this.
3. Save AS MUCH money as you can while the money is flowing in. Sure, it’s okay to have a nice car, but do you really need 5 nice cars? It’s okay to have a nice house but do you really need 5 houses?
4. Understand that eventually your career is going to end. You’re lucky if you get to play until you’re 40. If you retire then, chances are pretty good that you’ll be in retirement 40 - 50 years. Of course, you could always change careers at 40, which many sports figures do.
5. PROTECT yourself from scam artists. Wherever there’s a lot of money, there’s lots of crooks just waiting to take it from you. Resist the temptation to invest all your money in a hedge fund.
Thanks, Billy, for the interesting blog material.
Topics: Miscellaneous |