Last week’s issue of Sports Illustrated featured a fantastic article from Pablo S. Torre that describes how (and why) athletes go broke. Generally, it’s for the same reasons that people like you and me go broke: they don’t know enough about money. But pro athletes are also besieged by many people who are eager to help them “invest” their fortunes:
“With athletes, there’s an extraordinary metamorphosis of financial challenge,” says agent Leigh Steinberg, who has represented the NFL’s No. 1 pick a record eight times. “Coming off college scholarships, they probably haven’t even learned the basics of budgeting or keeping receipts.” Which then triggers two fatal mistakes: hiring the wrong people as advisers, and trusting them far too much.
“That’s the killer,” Magic Johnson says. Johnson started out by admitting he knew nothing about business and seeking counsel from the power brokers who sat courtside at the old L.A. Forum, men such as Hollywood agent Michael Ovitz and Sony Pictures CEO Peter Guber. Now, Johnson says, he gets calls from star players “every day” — Alex Rodriguez, Shaquille O’Neal, Dwyane Wade, Plaxico Burress — and cuts them short if they propose relying on friends and family. “It won’t even be a conversation,” says Johnson. “They hire these people not because of expertise but because they’re friends. Well, they’ll fail.”
There’s a perfect storm of inexperience, peer pressure, bad advice, and gobs of money that makes it difficult for a professional athlete to hold onto wealth. They need smart financial advice just like everyone else — perhaps more so. Most of the time, they don’t get it. According to the article, only two years after retirement, “78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.”
It’s not in anybody’s interest to sit these players down to educate them about how money works. In fact, the opposite is true. There are layers of people who profit from the ignorant with newfound wealth. (Not just athletes, but lottery winners and others, as well.)
But it’s not just bad advice that causes problems. The players make bad choices, too. They adopt unsustainable lifestyles. If they elected to save their money, they might live comfortably for the rest of their lives. Instead, they often succumb to peer pressure:
It’s all part of that ossified notion of how a pro athlete should live and provide for those around him. If he isn’t consuming conspicuously, then he hasn’t made it. “When I was a young buck,” says [LaTroy Hawkins], “I was trying to spend all my money. Now I try to preach to young guys in the clubhouse who are like that. I’ve got all this stuff from 10 years ago — jewelry, rims — that I think, Why the f— did I even buy this?”
I still shake my head at the lifestyles of the rich and stupid, but I’m less judgmental than I used to be. It’s easy to imagine I’d do something smarter if I won the lottery or experienced a huge windfall. But it’s one thing to speculate and another to actually live it.
[Sports Illustrated: How (and why) athletes go broke]