Why Professional Athletes Go Broke
AS A PROFESSIONAL ATHLETE YOU ARE THE ADMIRATION OF MANY, YOU GET TO DO WHAT YOU LOVE AND CALL IT YOUR JOB. WHICH IS PRETTY AMAZING.
Depending on the sport, you may be earning huge amounts of money and may even be considered a celebrity.
This all sounds great. So why is it so many professional athletes end up in financial stress soon after retirement?
What a lot of people don’t think about early enough is what comes after? When the time comes to retire from sport, you have to find a second career. A common misconception is that all athletes go into coaching or other sport related vocations but there are only so many positions available and even fewer that allow you to keep up a certain lifestyle you may have become accustomed to.
It doesn’t matter the sport, most of you will end your competitive career with way more years ahead of you than the years spent as a pro. Unless you’ve been an extremely high earner and looked after your money, chances are you’re going to need a second career. However, being a high earner doesn’t guarantee long term financial stability. Here are some alarming stats from some of sports highest paid athletes…
- 60% of Premier League Football players go bankrupt within five years of retiring (Source: XPro).
- 78% of NFL players go bankrupt within 5 Years of retiring (Source: ESPN).
- 60% of NBA players go bankrupt within 5 Years of retiring (Source: ESPN).
- One in three Premier League Football players get divorced within 12 months of retiring (Source: XPro).
It’s hard to believe considering a lot of these guys are on 7 figure salaries. Some of the big name athletes that have suffered this fate are Diego Maradona, Evander Holyfield & Mike Tyson.
So how does this happen? Here are a few possible reasons…
1 — Overspending
Most of us in our 20’s spend way more of our income than we should. For professional athletes this is no different and by the time you get done paying agent fees, taxes, buy property and live an expensive lifestyle, those large contracts don’t go as far as you might think.
2 — Career duration
The “shelf life” of athletes is very small, with most retiring in their 30’s. The first contracts are rarely huge, you still have to prove yourself as a pro to warrant big money. When you reach your highest earning potential (your prime) you only have a small window of time to maximize your income. As you near retirement income typically reduces for the large majority of athletes. So although the contracts seem huge at times, without a second career that money will need to last a long time.
3 — A lack of financial knowledge
Most people are not well educated in finance when they’re young. We learn from mistakes over time and we recover. For athletes earning high salaries, those mistakes can be very costly and with the short earning window, there isn’t always the time to fully recover. Poor investments and helping out friends and family can also be very costly, business investments should be done with the head and not the heart. If a family member comes to you with an idea, always get a finance professional to look over it.
4 — Keeping up with the Jones’s
You’re 23 years old, you just signed a large contract and you feel invincible. Some of the marquee players in your team earn triple your wages, and are spending thousands socialising on a regular bases. They have the latest Bentley or 3, a mansion, and a vacation property. You feel you’ve worked hard, earned your pay, and want the same. Now, supposing you don’t quite reach the potential expected of you? Maybe you get injured and are never quite the same again. After 3 years of doing this, your next contract is nowhere near the same amount of money, you now have to run these properties, sell the cars for way less than you paid for them, and you beat yourself up over the money you spent in nightclubs which could have been saved or invested wisely.
5 — Not preparing early enough for your 2nd career
This is the area that I feel the most passionate about for pro athletes, and is a driving force behind the business of Six of 1. As I mentioned above, you will spend more years retired from pro sport than years competing. You’d be crazy not to plan for your second career early, and get your foundation in place long before you seriously consider your retirement. I speak to a lot of athletes and the one common denominator is that a ‘normal’ job just isn’t an option. How can you go from performing to 80,000 people to sitting in a booth at a call center?
Years spent in the public eye are the most powerful marketing window you will ever have to start a business. You have a targeted audience that listen to what you say, and the support of your peers — this is business gold. Take advantage. Leaving it until you’ve retired is not the way to go. The sad truth is, for every day you’re retired your pull fades (unless you reached icon status). New sports stars emerge and you have more to compete against. Do it now, do it while you’re in demand.
Image: Eduardo Merille
Thank you for reading! If you found this useful, please scroll down and click the “recommend” button.