If you are a sports fan, you might recently have heard pundits talking about this scary quote
60 per cent of retired NBA players go broke five years after their NBA paycheques stop arriving.
Yes, those same basketball players who live millionaire lifestyles many of us could only dream of. One day they wake up and realize they have lower net-worth than members of their entourage, or even their pool boy. How does this happen?
It’s a familiar story, British football stars are often in the news for going bankrupt, even though they earn in a week more than most people in the UK can take in a year. Lottery winners lose all their money very often, even with excellent financial advice laid on by the lottery company.
In my view there are three major reasons people with money lose it as quickly as they make it.
Sports people are at a disadvantage in the earning game. While they have good years where they earn fantastic amounts, this entirely depends on their youth and good health. If in the good years they don’t find alternative income sources, they are sunk.
As well as earning skills, everyone must learn how to spend their income also. Buying the biggest, baddest, blinged-up, diamond encrusted doodads and widgets is not a good long term investment strategy. It doesn’t matter how much money you make, if you are buying up liabilities rather than investments and assets, don’t be surprised when the money supply dries up and you have nothing to show for it.
Vultures and Predators
A big problem is the people that are magnetized to their earnings. Next thing you know they have an entourage bigger than their team, family and friends hanging on, and “advisers” siphoning off their wages.
Everyone, not just sports stars, need to put away money for the future, live within their means, and buy assets not just luxuries. Most of us do not need to worry about a growing entourage but we DO need to only take the best financial advice and be careful just how generous we can afford to be!