BY LORENDA PHILLIPS
One of the looming questions around sports is “Why do professional athletes go broke?” This question was posed and answered by highly paid athletes, financial advisers, coaches and business managers in the dramatic documentary from ESPN, 30for30Broke. The players interviewed, those who had multi-million-dollar contracts and/or sponsorship’s, lost millions in bad deals, divorces, entourages, and luxury items like jewelry and automobiles.
According to legitimate sources, including Sports Illustrated, professional athletes are going broke shortly after retirement. Yes, some of the highly paid high-flyers blew their money, but what happened to all the thousands of players who made mid-range money? Why did they go broke?
There is a myth in pro sports that has been perpetuated for years:
“If you make it to the pros, you’ve made it.”
This myth has been repeated by coaches, parents, agents, business managers, the media, and athlete directors to generations of athletes. It’s simply not true.
First of all, most players don’t play long not enough to get to the second contract. The following are the average number of years: the NBA is 4.5, MLB is 5.6 and NHL is 5. And the NFL (Not For Long) leads the lowest at 3.5 years.
Secondly, they don’t make the larger contracts until they are past the first few years. And, the NFL does not automatically guarantee player contracts. If athletes are cut before their contract expires, they do not necessarily receive the remainder. Ouch!
Thirdly, the athletes are not well connected to helpful resources, like community or business influencers so they do not set themselves up for opportunities in the future. They are too busy signing autographs at fundraisers and having fun at parties instead of gathering cell numbers to make business connections.
The underlying causes of broke athletes
No Plan for the tremendous increase in money. Imagine you’ve always been paid minimum wage for part-time work, then you receive your first pro ball paycheck for $41,176.47. And, you can expect another $41,176.47 the following week, and 15 more weeks after that. It’s like winning the lotto! Also add in their age of about 22 and you have the makings of a plan gone wrong because they have no plan. There is no spending budget or savings plan. The parents can help the young athletes, but often there is a lack of financial knowledge in the family. Sometimes there is only a single parent and that can have its own financial hardships.
Poor financial advice from family members to PA approved financial advisors. 17 NFL players lost $43M in a botched real estate development of a casino in Alabama. Days after the casino opened it was shut down because it is against the law to gamble in Alabama. All the money was lost. Vernon Davis, one of the athletes who was involved in the investment, stated, “I take most of the blame. As athletes and players in the NFL, I think we should take the blame, because we can change it. We just gotta wake
up”. This was reported by 60 Minutes, October 2016.
Purpose and Identity vanish. Once athletes are released and not picked up by another team, they realize it is over, and their playing time in pro sports does not last as long as they expected. Not only is the money gone, or close to it, their purpose and identity are gone as well. Professional sports is an intense occupation. They know themselves to have a certain role in the game, and suddenly they are fired. Their career is no longer available to them, and there is not an agency to help them with their next gig. It can seem like a complete loss. This type of loss greatly impacts the financial, emotional and psychological elements of an athlete. It can be difficult to find suitable work, occupations that are a match for their interests and talents.
The loss of income, status, and purpose takes a toll on relationships. In the first few years of retirement, the divorce rate is higher. Divorce adds to the overall financial loss.
Poor Health is another drain on the money.
Injuries are an unfortunate outcome of rough, competitive sports. Men jumping and falling on each other; balls, bats, sticks, pucks all taking their toll on the athletes. They receive a plethora of injuries: ACL damage, sprains, shin splints, broken bones, face and eye lacerations. The surgeries to repair their broken bodies can result in inflammation and more bench time. Players are still paid while on injury list, but as soon as they are released, they can be cut.
The spotlight is now on the severity of brain concussions. The NFL remains the leader in reported concussions of 135 for 2018 season. The impact on the brain from a concussion can bring about neurological disorders, including CTE, a degenerative disease that triggers suicidal thoughts and erratic behavior.
The majority of the health benefits are not picked up by the athletes because they do not reach the vested time of three credited seasons. There are hundreds of players placed on the injury list every year and a large percentage of them are on their own faced with paying doctor’s bills long into their retirement.
Although we see lots of frivolous spending and poor financial decisions made by professional athletes, the majority of the players do not fall into that category. We will dig deeper into additional reasons why the players suffer from poor money management in the next post.
