Pro-athletes make a lot of money for what they do. Between sponsorship deals, branded fashion lines, and multi-million-dollar contracts, it should be impossible to spend it all in one lifetime. Yet, for a handful of professional sports players, that’s exactly what happens. They squander their fortunes on mansions and jet planes, winding up broke or worse: bankrupt.
When it comes to bankruptcy, a person’s jersey number or free throw differential doesn’t matter. Strip away their game-day stats, and these down-on-their-luck athletes are just like you.
No one is immune to financial emergencies. The only difference is that their emergencies tend to have a higher price tag. Otherwise, the same underlying problems are at the root of the issue.
Let’s look at three of them below:
#1: Poor Financial Literacy
A lack of money-savvy knowledge can lead you into making poor decisions with your money.
Take Shaquille O’Neal, the NBA’s first-round draft pick for the Orlando Magic back in 1992. After learning he landed a sponsorship gig, he spent all $1 million of his paycheck in one day.
Using basic math, Shaq assumed it was in his right to do so. But what he failed to take into account was his agent’s cut of the deal or the taxes he would have to pay.
At the end of his shopping spree, Shaq was in the red, and it was all because he lacked the financial literacy to handle his new paycheck.
You’ve been there before: you’re all out of money, but you still have bills to pay. Payday is still off by a week or two, and your emergency fund comes up empty.
If you need help covering unexpected emergency bills, you might discover online lending options like installment loans that can help. Applying for installment loans online is quick, and if approved, you may receive your funds as soon as the next business day.
While an online installment loan may be a convenient fix to an unexpected emergency expense, its no replacement for financial literacy. This money know-how can help you balance the books, so you may budget around unforeseen expenses.
#2: Short-Term Careers
The average NFL player is in the game for just 3.3 years. Sure, they’re making more, but they need to ensure they invest wisely so that this cash lasts them into retirement.
Unfortunately, the stats are against them. The National Basketball Association reports the average player falls on hard times just five years after retirement. It’s even worse for NFL players, as 78 percent of them go bankrupt just two years into retirement.
#3: Bad Investments
Diversifying your income is a great way to offset an early retirement. That’s why so many pro-athletes back investments and sign sponsorship deals.
Sometimes, it pays off, like when LeBron James sunk money into Beats by Dre and Liverpool F.C. When Apple acquired Beats by Dre, James, a silent investor, reportedly earned $700 million. Meanwhile, his tiny stake in Liverpool is now worth roughly $43.6 million.
Other times, athletes make mistakes that end up costing them. Take Raghib “Rocket” Ismail, for example, who once signed the most lucrative NFL contract in history. He lost it all through a series of bad investments that included a failed record label, a rock n roll themed restaurant, and pre-paid phone cards.
When you’re raking in millions each year, it’s easy to think you’ve got it made permanently. But a simple mistake can throw away even the biggest payload.
At the end of the day, anyone can make a costly mistake. Whether you earn seven figures or five, it’s important you spend within your limits.