In a Sports Illustrated article written in March 2009 it was revealed that “almost 80% of NFL athletes face serious financial distress or bankruptcy within two years of retiring from the league. 60% of NBA players who enjoy longer careers than their NFL colleagues, have similar problems within five years.”
As you know, athletes typically make more money than the average person. The minimum NBA contract for a rookie is roughly $490,000.00 annually for the 2011-2012 season according to NBA.com (Think about what it is now with increased salaries). According to Spotrac.com, the minimum rookie contract in the NFL is $465,000.00 for the 2017-2018 season.
That is more than the average person earns in ten years. So how could 80% of NFL athletes and 60% of NBA athletes have financial distress within five years? Excellent question. Allow me to give some potential reasons:
Possibility #1: Financial Decisions
No matter how much money one earns, we all must make wise financial decisions. If you don’t have the ability to make those wise decisions, then my suggestions is that you find someone you can trust to assist you with this matter. Notice that I said someone you can trust.
That means you may need to interview a number of financial professionals to find out who you are most comfortable with and slowly establish a relationship with that person or team of people. Over time, you will know if they have your best intentions at heart or is it simply a money grab!
Possibility #2: Misconception
There are two misconceptions that many people make when it comes to earning money. The first is that they will always be able to earn money at the rate they currently are. That is a big mistake. Depending on how a person earns money, as they get older they may not be able to keep up a particular pace. NFL and NBA athletes have a significantly short career as opposed to an office worker (no offense). This means their financial matters need to be handled differently than one who has a slightly longer career.
The second mistake that many make is that, based on their current income level, they believe they are set for life. This is an even bigger mistake. Why? One simple thing—it’s called inflation. The simple definition for inflation is the rising cost of the same item over time.
The cost of a loaf of bread in 1967 was $0.50; gas (regular unleaded) was $0.30 a gallon in 1967. Fast forward 50 years to 2017 and the average price of that same loaf of bread is $1.35 and a gallon gas (regular unleaded) is $2.32 per gallon. That is inflation, and that is why no matter what you earn today, it won’t be enough on its own down the road. You and I have to develop stream of income that will cause our money to grow over time to defeat or offset the money destroyer named inflation.
Possibility #3: Limited View
We must have an eye on our present financial condition while keeping our long-term financial situation in view. This means we have to make certain provisions now for the future.
Maybe you live in an expensive city like Los Angeles or New York City. As you get closer to retirement, you have to decide if you can afford to continue living in these cities after retirement. If the answer is no, a plan must be developed to identify a city that maybe more suitable for your future budget that is realistic. This may mean that you begin to search for a property in that new city.
There are countless possibilities when it comes to this matter. The key idea here is to begin thinking about the future while having the pulse of today.