The average professional athlete in the U.S. will make more in one season than most of us earn in our entire lives…[yet,] despite those staggering salaries, 78% of NFL players, 60% of NBA players and a very large percentage of MLB players file bankruptcy within five years of retirement. [Let’s take a look at] 5 possible reasons why the average athlete is destined to go (quickly) from fame to shame.
By Jason Cimpl (www.wyattresearch.com). The article* was originally entitled Five Reasons Professional Athletes Go Broke.
If data from Mint.com is accurate, the average athlete is destined to go (quickly) from fame to shame. Here are five possible reasons why:
1 – Overspending
Scott Bercu, a financial accountant for professional athletes, believes this group spends like mad, and blows their savings too rapidly. He said, “They see their salaries as infinite, like it doesn’t end, like they can’t spend it all but if you get $5 million a year, by the time you get done paying your agent and taxes, you have $2 million left to spend.”
2 – Career duration
The average career span in the NBA, MLB and NFL is 4.8, 5.6 and 3.5 years, respectively.
The “shelf life” of athletes is tiny. Professionals in this industry have a small window to make their millions, and if they don’t they cannot survive on their savings for very long (even if they saved responsibly).
3 – A lack of finance knowledge
Ed Butowsky of Chapwood Capital Investment Management believes athletes don’t understand finances. He says the leagues try to help educate them, but the system doesn’t work well enough.
Athletes see prominent people spending money, and they believe that their spending pattern should be the same. However, athletes fail to take into account that those prominent members have spent a lifetime learning about financial responsibility and budget strategies.
4 – Poor investment decisions
Also, according to Butowsky, athletes are targets for poor investment pitches. He said, “Chronic over-allocation into real estate and bad private equity is the number one problem in terms of a financial meltdown. I’ve never seen more people come to me about raising money for those kinds of deals than athletes.”
5 – Hangin’ with a bad crowd
Athletes often do try to be responsible with their savings. However, they pick the wrong financial advisors. The NFL Players Association claimed that 78 players lost a total of $42 million between 1999 and 2002 as a result of bad financial advisors. In fact, Bob Young – managing director for APEX Wealth Management – says athletes often don’t know who manages their savings. He said that he frequently asks players how they’re doing (financially), and they’ll often respond, “I have no idea. All the bills are paid by someone else.”
A few quick thoughts of my own[It is very disconcerting] if the NFL and NBA data is correct. That’s a high rate of bankruptcy, and the leagues should provide better guidance for its athletes….[Unfortunately,] professional athletes are easy targets. They are highly visible, have lots of money and limited experience.
Though I find it hard to imagine losing millions of dollars in savings in such a short span of time, I also have a solid financial background, applicable work experience and a family that educated me on personal finance issues. Before pointing the finger at athletes, it may be wise to step into their shoes (cleats) for a minute … maybe their financial woes aren’t entirely their fault or a result of reckless spending…
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and www.FinancialArticleSummariesToday.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*http://www.wyattresearch.com/article/five-reasons-professional-athletes-go-broke/29606; ©2013 Wyatt Investment Research & Business Financial Publishing LLC (If you would like to learn how you can bank steady gains with well-timed investments in stocks that are ready to run… then consider taking a free, 30-day trial to our growth stock service, Top Stock Insights. You’ll discover exactly how we’re earning exceptional returns and get instant access to every special report and investment recommendation. Click here to try Top Stock Insights, free.)
Find us on Facebook
Follow us on Twitter (#munknee)
Subscribe via RSS
Let’s Stop Fooling Ourselves!…The American experience of rising standards of living and general prosperity have always rested upon a deep and healthy middle class….[one] of earnings and savings, not credit and borrowing… Simply continuing along the status quo is a vote for digging ourselves deeper as the constraints of the future arrive. Behavior change is necessary in order to improve our chances. [This article presents 14] prudent behaviors to adopt…as we start trending back towards more historic baselines. Words: 1340
If you’re among those struggling with debt and just want to be rid of it and move on with your life, it can be helpful to find some information and inspiration from others who are financial experts or people working to pay off substantial amounts of debt. You’ll find all of that, and more, in these inspirational personal finance blogs that can offer you advice, motivation, and guidance in paying down your debts so you can start putting that money to other uses. Words: 1010
The economy is slowly hobbling back to health but for many Americans the rainy day fund is still looking a little dry, the credit card bill is still looking a little scary [Unfortunately, the liklihood is that,] as the economy strengthens further, many Americans will…spend their new found extra cash rather than save it. Words: 474
The west is living far beyond its means and is struggling with pitifully anemic growth. This is a long-term trend, and one that is only going to accelerate. Nevertheless, as obvious as the indicators may be, few people will actually do anything about it. A lifetime of propaganda will plant many heads in the sand, ignoring the dangers and opportunities all around. [Let’s take a close look at just what these indicators are.] Words: 311
Households with credit card debt carry $16,000 at an average rate of 15% and, given that some households have little credit card debt, you can imagine how high the debt is for others.. Imagine, $16,000, but that is actually down by 17% as the grand American household deleveraging continues. [Be that as it may, credit card debt is still excessive with all ages and all income groups. Here are the facts.] Words: 760
Rising education and medical costs, on-going credit card interest payments, well used personal lines of credit and large mortgage debt and home equity loans – most a penchant for living beyond their means – is keeping 75% of American households in some degree of debt. Take a look and then pass it on to your friends, neighbors and co-workers.
The median household income in the U.S. is $51,914, according to U.S. Census Bureau data. To find out just where that cash is going, we’ve trolled through the latest data in employment, transportation, and common consumer expenditures. [Here it is.]
How do Americans spend their money and how do budgets change across the income spectrum? The graph below answers these questions. Words: 240
We all know that the true cost of a car doesn’t end at it’s purchase price but most people don’t really know what the annual cost will actually amount to. The next time you are shopping for a car consider these additional costs.
More than 25% of American workers (33% of those in their 40s) with 401(k) and other retirement savings accounts use them to pay current expenses, new data show, [which is] undermining already shaky retirement security for millions of Americans. With federal policymakers eyeing cuts to Social Security benefits and Medicare to rein in soaring federal deficits, and traditional pensions in a long decline, retirement savings experts say the drain from the accounts has dire implications for future retirees. Words: 890
Look, if you’re absolutely stuck right now, then you’ve got to do what’s necessary but, in my opinion, you should avoid 401(k) hardship withdrawals at all costs … and think long and hard before you consider borrowing against your future retirement. With so many people nearing retirement already grossly underfunded [such actions are] going to prove catastrophic down the line. Words: 1043
A life insurance policy is intended to provide your family with a sizable amount of money should you meet an untimely death and, as such, can be said to be a something of a an ultimate bonanza – a pot of gold, if you will. Most people, however, think the only way to get money from a life insurance policy is to die but there is another way should your circumstances change and that is called a life settlement. In this article I provide you with some insider insights on how to go about negotiating the maximize payout on such a settlement. Words: 851
Many Americans are reacting to the economic downturn not by resolving to save more but by no longer actively planning for retirement. “That’s exactly the opposite of what they should be doing,’’ said Paul Ballew, senior vice president at Nationwide Insurance. Words: 369
Visit wsj.com – HERE – to find their calculator which shows where your household income stands compared to others in the U.S.. $506,000 puts you in the top 1%; the much talked about $250,00 in the top 6%; $200,000 in the top 10% while an annual salary of $43,000 puts you in the top/bottom 50%. Where do you stand?
Paying off the mortgage early is an idea with obvious appeal, but not one that many middle-class home “owners” pursue. If your interest rate is so good that the bank just made a bad bet in giving you that low rate, you might want to continue enjoying the benefits as long as possible. In many other circumstances, however, paying off the mortgage can be a fine money management move indeed. [Below are 10 sound reasons to do so.] Words: 1588
Withdrawing from a $1,000,000 nest egg upon retirement using the familiar 4% rule to generate a successful 30-year inflation-adjusted (3% per annum) retirement proved to be totally inadequate as per the retirement withdrawal strategy that I put forth in a previous article (1). In fact, it crashed and burned in year 25 of the 30-year plan! In fact, as I show in this article, it will only succeed if your portfolio outperforms the S&P 500 by 5% every year for 30 straight years – and what is the likelihood of that? Words: 1533
Frugality often gets a bad rap. Many people misunderstand frugality and assume that it’s nothing more than being “cheap” when, in reality, frugality is making sure that you get the most from the money and resources you have, even if they are limited. [Here are 10 ways to do just that.] Words: 1132
The reason you are not a millionaire (or even on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money but the truth is that, for most people, it does not matter how much money you make… [but, rather,] the way you treat money in your daily life. [Let me explain.] Words: 875
Many people assume they aren’t rich because they don’t earn enough money. If I only earned a little more, I could save and invest better, they say. The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it’s how you treat money in your daily life. The list of reasons you may not be rich doesn’t end at 10. [Here are 10 more.] Words: 842
Personal finance isn’t nuclear physics – just spend less than you earn, save and invest the rest – but knowing what should be done and actually doing it, however, are two different things. Here are 10 money lessons I wish I had known when I was 20 which have the power to change your life if you are willing to embrace them. Words: 1340