Sports leagues like the NFL, NBA, and to a lesser extent the MLB and NHL create almost overnight millionaires when they recruit young players into the world of professional sports.
Many of these athletes come into this brave new world straight out of the somewhat sheltered worlds of family and college. Many of them have never even had to balance a checkbook, much less manage the needs of responsibly maintaining a million dollar budget month after month, while planning for a future that’s anything but guaranteed.
Why Do Players Lose it All?
It’s easy for people to point fingers, shake heads, and throw judgments at players who have so much and then lose it all in a flash. But here’s the thing, the problem is far too common and pervasive in the sports industry and it’s one that can be so easily solved with the right attitude and education.
Fox Business reports that 78 percent of NFL (National Football League) players face extreme financial difficulty or are forced to file for bankruptcy within two years of playing their final games. The numbers for NBA players are only slightly lower with 60 percent facing the same grim financial future.
It’s a problem we need to solve. First, though, we have to understand why it’s happening.
There are a few common causes that all revolve around the fact that young people, many of which grew up in poverty, or close to it, receive an insane amount of money rather instantly, with little to no restrictions.
These are just a few of the ways that lose so much so fast.
Living Beyond their Means
There’s no doubt that sports pros make good money. They can afford a nice lifestyle. The problem is that most sports professionals have brief careers. They need to save their millions now, and live a little more modestly in the present and near term, in order to protect their financial futures.
Unfortunately, it’s all too often just a message young men hoping for a long and profitable career simply don’t want to hear.
Generosity
While no one wants to think of generosity as anything less than a positive attribute, when it comes to giving money to friends and family you can, very easily have too much of a good thing – especially when so many people are ready, willing, and even eager to take advantage of that generosity.
Touching on Other Reasons
One of the other two primary culprits involve the young age of professional athletes. Young men are often difficult to appeal to when it comes to spending responsibly. The other is the failure to plan.
Is There a Flip Side?
Some athletes are wise. They spend the first years making solid investments in businesses. In terms of Peyton Manning, many people don’t realize that he now owns 21 Papa John’s pizza franchise restaurants in Colorado. He understands that he’ll need to make money long after he’s no longer throwing touchdowns in the NFL.
How Do We Solve the Problem?
Peyton Manning, whether you’re a fan or not, is an excellent example to follow on and off the field when it comes to dedication to the game and financial matters. Young players need to surround themselves with good advisors and accountants who have their best interests at heart — professionals who will help them say no to bad investments and yes to those that will help ensure their financial futures.
There’s no quick fix to solve the problems of youth, enthusiasm, and generosity, but the right advisors can help ensure a legacy for young players – one they’ve worked so hard to achieve, while helping them avoid the hard fall that follows less than frugal lifestyle choices while on top of their games.
Morey and Associates is a CPA Accounting Firm with offices in Newport Beach and San Clemente. Our practice focuses on high net worth individuals, entrepreneurs, athletes, and small businesses. Our goal is to protect your life long earnings from taxes and creditors. To learn more, call us at 949-759-5626 and ask for Jerry Morey.