How Athletes (and Others) Go Broke

I just ran across an interesting interview with former NBA player Jalen Rose. In it, he discussed how it is that pro athletes wind up going broke despite their ultra-rich contracts.

“You want to buy your mom that house, you want to buy your dad that truck, you want to have your brothers and sisters be able to pursue the dreams and careers that they often have, and use your money to do it.”

When the host asked how far these things extend beyond the immediate family, Rose responded:

“It’s everybody that you run into. Literally. You have family members that you never would have thought. You have friends with the best ideas that can make both of you rich. The only thing that the idea needs to come to life is your money.”

When asked how long it takes to learn to say no to such requests, he replied:

“You learn to say ‘no’ when you’re about to get into your second contract and you’ve already spent the first one.”

He also said:

“If you want to lose money fast, I’ll tell you three ways: record labels, restaurants, clothing lines.”

To these I would add: engaging the services of those who don’t have your best interests in mind. In fact, this is exactly what happened to NFL quarterback Vince Young, who was recently in the news for having blown through the proceeds of a guaranteed contract worth $26M in less than six years.

How Athletes (and Others) Go Broke

In case you missed the story, both his former agent and his financial planner have been accused of forging his signature and impersonating him on the phone to misappropriate his funds and to also take out loans in his name. Sad.

To be fair, these things aren’t unique to pro athletes. In fact, there are numerous stories of lottery winners who wound up going bankrupt. How? Similar things. Being overly generous with those around you, engaging the services of people who don’t have your best interests in mind, and making poor investments.

In fact, after controlling for all other factors, a study released in 2010 found that winning lottery winnings actually increase the likelihood that you’ll go bankrupt.

Beware the windfall…

7 Responses to “How Athletes (and Others) Go Broke”

  1. Anonymous

    For myself, it isn’t a concern about going broke about as quickly as I get the money; it becomes more of an issue if I can’t find someone I can trust. To end up with some “financial” expert who’s as crooked as a rheumatoid-arthritically riddled finger would definitely cause me to go broke within a matter of months.

    My dream of what I would do with my winnings is one of being a philanthropist. I’ve never “etched-a sketched” from this dream, and probably never will.

  2. Anonymous

    I just finished reading Michael Oher’s (of The Blind Side fame) book titled, “I Beat the Odds”. Near the end of the book he offers great advice to pro-players who will be approached by others looking for them to “share the wealth” of their new-found success. He didn’t buy a house initially, but just rented a house in Baltimore. He helps select folks, but is careful not to be guilted into supporting others who feel they are owed something. Michael sounds like a generous guy, but he says you can certainly use up all your money in a hurry if you aren’t careful. Good advice to be had…

  3. Anonymous

    Many people like to hate on athletes and celebrities that go broke, saying things like, “How do you go broke after making tens of millions? That would never happen to me!”

    Actually, it’s easy to go broke no matter your income level. Let’s say someone makes $50K a year, and he’s saying that about a rich athlete. Well, there’s also someone else in the world who makes $25K saying that he would never go broke if he made $50K. Etc.

  4. Anonymous

    If I ever happen to win the lottery magically by finding a winning ticket I would make sure to have a plan in place before I cashed it in.

    Regardless of whether you get a windfall or not poor or no planning will likely lead to having less money than if you had planned.

  5. Anonymous

    Most people don’t realize that, financially, you can have one of only two identities: spender/debtor and investor. There is no middle ground.

    And the only way to secure long term financial peace is being an investor. There is no other possibility. Until someone, rich or poor, understands that, they end up broke.

    As one of the planners said on the ESPN movie last week (Broke): most of us normal folk have the benefit that our incomes increase gradually over our lifetimes. That allows us to make our mistakes with small amounts, and learn money management as we go. These kids don’t have that luxury. They get their money while they’re still learning, and by the time they figure it out, their income streams have ended…

  6. Anonymous

    The ESPN series 30/30 had a 1 1/2 hour thing on this where they featured/interviewed a dozen former NFL players, & a few other athletes including Curt Shilling.

    Bottom line is that there are plenty of reasons, but they all revolve around the fact the average pro athlete is a mentally challenged narcissist who attracts the most interesting collection of hanger ons, females, agents & financial “advisors” that exist on the planet. This environment, if you will, combined with their ultra competitive nature in virtually anything & everything leads many to heavy gambling……… addition to everything else. I’ve personally known a couple of athletes who were text book examples of all of the above.

  7. Anonymous

    Great post! Reminds me of MJ DeMarco’s book, in which he mentions that “financial stability is not related to income. You can be an athlete that makes $3 million a year, but if you spend $5 million, you will go broke”. Finacial stability is blind to income.

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