OT: 60% of NBA players broke within 5 years

[mook]

http://sportsillustrated.cnn.com/vault/article/magazine/MAG1153364/1/index.htm

• By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.
• Within five years of retirement, an estimated 60% of former NBA players are broke.
....


Then there are the unnamed athletes and team personnel who pawned 400 title rings to the online reseller championship-rings.net over the past three months, a spike of about 33% from the same period last year. (A 2008 Giants Super Bowl ring was among them.) "It's mostly younger players who've been selling," says Tim Robins, the site's owner. "It's the economy. Selling these items is always embarrassing, a last resort."
....
In a survey reported by the financial-services firm Rothstein Kass in December, more than 80% of the 178 athletes polled—each with a minimum net worth of $5 million and two thirds under the age of 30—said they were "concerned about being involved in unjust lawsuits and/or divorce proceedings." By common estimates among athletes and agents, the divorce rate for pro athletes ranges from 60% to 80%. In divorce proceedings, of course, husbands routinely lose half of their net worth. But for athletes there is an aggravating factor: when the divorce happens. Most splits occur in retirement, when the player's peak earnings period is long over and making a comparable living is virtually impossible. Such timing is no accident. "There's this huge lifestyle change," says former NBA center Mark West, a licensed stockbroker who is now the Suns' vice president of player programs. "You and your wife are suddenly always at home, bugging each other. Before, you'd always say, 'I gotta go to practice.' Now you don't have to practice. You have to finish conversations."
....
In 1994, when NBA center Dikembe Mutombo was engaged to Michelle Roberts, a med student, Roberts refused to sign a premarital contract the day before the wedding. Five hundred guests—including a large party from Mutombo's native Democratic Republic of Congo—had begun flying in to Washington. "[Roberts] never signed," Falk says, "and Mutombo never married the girl." Calling off the nuptials reportedly cost him $250,000.
....
Perhaps the upper limit on spending was set by the famously profligate Shaquille O'Neal, who—according to a document obtained by the Palm Beach Post during O'Neal's canceled divorce filing in January 2008—spends a total of $875,015 each month, including $26,500 for child care, $24,300 for gas and $17,220 for clothing. But O'Neal, who also has been known to fund charities anonymously and cover medical bills for complete strangers, has the wherewithal to remain solvent.

 

[Idog1976]

http://sportsillustrated.cnn.com/vault/article/magazine/MAG1153364/1/index.htm

Perhaps the upper limit on spending was set by the famously profligate Shaquille O'Neal, who—according to a document obtained by the Palm Beach Post during O'Neal's canceled divorce filing in January 2008—spends a total of $875,015 each month, including $26,500 for child care, $24,300 for gas and $17,220 for clothing. But O'Neal, who also has been known to fund charities anonymously and cover medical bills for complete strangers, has the wherewithal to remain solvent.

24k for gas? WTF is she driving to Buenos Aires every weekend or something?!?!?

I'm sorry but why in god's green earth would you marry if you were an NBA player?

 

[maxiep]

It's the financial angle that will make the looming lockout so entertaining. I look forward to more quotes like Patrick Ewing's: "Sure, we make a lot of money. But we spend a lot of money, too."

 

[DaRizzle]

Wow...amazing article...thanks for posting

 

[Shooter]

I posted this statistic several weeks ago. I still shake my head about it . . .

 

[Paxil]

I think that most professional athletes don't consider that they may be making the majority of their entire life's salary in 5-10 years. If I lost my job I'd be broke in a lot sooner than 5 years. =) Imagine if you lost your job and had to start a new career and it couldn't have anything to do with your old one. How hard would it be to maintain your lifestyle? Not saying we should feel sorry for them... just that in general I think most of us would be in the same boat and it isn't unique to athletes. I have read similar stories about lottery winners.

It is sad though... but I am not sure what league's could do about it. I doubt the players want to cough up more to unions for retirement... so they are stuck with managing it themselves.

 

[maxiep]

I have no pity for professional athletes who make more than $2MM over their careers nor lottery winners. Their "lifestyle" is their responsibility. They could choose to live more modestly.

 

[Mediocre Man]

This makes a lot of sense.

I am sure I will get Jesse Jacksoned for this, but most NBA players come from poor neighborhoods. Not all, but most. They aren't used to having money, and thus squander it on shit they don't need to show they have "arrived". Most go to school and don't learn anything because they don't have to (they think). Then bring in these damn gold digging women, and you have yourself an easy target. An uneducated rich kid that is looking to show people he is the shit. Financial advisors steal money, women take money, player blows money.


Actually, my in-laws pissed away 500k in about 5 years because they had never had mney, and didn't know what to do with themselves. The suggestions my wife and Igave were solid, and today they would have 600k in the bank, and would have lived off interest. Instead, they have no money and live with all of their kids off and on.


I have never had a problem with spending the money you make. Most people do it, why should rich people be any different? We all buy houses we can't afford, and cars that are too expensive

 

[Idog1976]

I have no pity for professional athletes who make more than $2MM over their careers nor lottery winners. Their "lifestyle" is their responsibility. They could choose to live more modestly.

That's racist Maxiep!

 

[Idog1976]

This makes a lot of sense.

I am sure I will get Jesse Jacksoned for this, but most NBA players come from poor neighborhoods. Not all, but most. They aren't used to having money, and thus squander it on shit they don't need to show they have "arrived". Most go to school and don't learn anything because they don't have to (they think). Then bring in these damn gold digging women, and you have yourself an easy target. An uneducated rich kid that is looking to show people he is the shit. Financial advisors steal money, women take money, player blows money.


Actually, my in-laws pissed away 500k in about 5 years because they had never had mney, and didn't know what to do with themselves. The suggestions my wife and Igave were solid, and today they would have 600k in the bank, and would have lived off interest. Instead, they have no money and live with all of their kids off and on.

The underlined is the crux of the matter. NBA players have a big target painted on their backs as do NFL etc. I wouldn't say I feel sorry for these players, but I understand why they would be an appealing target to folks who are unscrupulous parasites.

 

[Minstrel]

Many (not all) of these players come from poor backgrounds and making it via focus on athletics is not the same as making it via focus on business or education. Many of them didn't grow up in an environment with money to handle and basketball development doesn't generally come with emphasis on economics or handling money. So when they finally make it, they don't have any skills, experience or basic understanding of money management. It ends up being luck of the draw as to whether anyone around them has that experience and is trustworthy.

 

[maxiep]

That's racist Maxiep!

LOL! I chose $2MM, because at an average of 5%, that's 100K in annual lifetime income. Not much, but enough to live a middle class life without ever having to work again..

 

[maxiep]

If I owned an NBA team, I would request that one of my financial advisors (I assume I would have more than one if I were wealthy enough to own an NBA team) to work closely with the players I signed to properly manage their money. In fact, I would put it in their contract that they had to meet monthly with said advisor.

Teach these kids to live within a budget that will keep them financially secure for the rest of their lives.

 

[Idog1976]

If I owned an NBA team, I would request that one of my financial advisors (I assume I would have more than one if I were wealthy enough to own an NBA team) to work closely with the players I signed to properly manage their money. In fact, I would put it in their contract that they had to meet monthly with said advisor.

Teach these kids to live within a budget that will keep them financially secure for the rest of their lives.

I think that would be great. The financial advisor ought to have a truckload of condoms and prenuptial agreements as well. Lord knows if I was an NBA player that's how I would lose my money. To paraphrase Dave Chappelle at the end of "Half Baked"... I love money, I LOVE IT...just not as much as I love pussy.

 

[crandc]

NBA rookie orientation includes both financial management and sexual advice (not sure management is correct term but definitely talks about condoms and consent). I just think a lot of young men consider themselves immortal and untouchable.

 

[Minstrel]

If I owned an NBA team, I would request that one of my financial advisors (I assume I would have more than one if I were wealthy enough to own an NBA team) to work closely with the players I signed to properly manage their money. In fact, I would put it in their contract that they had to meet monthly with said advisor.

Teach these kids to live within a budget that will keep them financially secure for the rest of their lives.

I think that's a good idea. I think college should also institute required money management classes for their athletes.

 

[oldmangrouch]

Another option would be to allow those millions in earnings to be paid out over an extended period, instead of the length of the contract. That could even be a selling points to FAs: "our investment councilors earn the best interest on your defered income."

Of course, Das Kommissar Stern would never allow it.....it would mess with his sacred salary cap.

 

[mook]

If I owned an NBA team, I would request that one of my financial advisors (I assume I would have more than one if I were wealthy enough to own an NBA team) to work closely with the players I signed to properly manage their money. In fact, I would put it in their contract that they had to meet monthly with said advisor.

Teach these kids to live within a budget that will keep them financially secure for the rest of their lives.

I wonder if the franchise would almost prefer them to burn through the cash as quickly as possible, because it might make them more willing to re-up on the extension early, rather than risking free agency.

Also, it seems to me that an older, financially desperate athlete might be more willing to work harder toward the end of his guaranteed contract if he knew he had to get another contract or risk losing his home.

I don't really know for sure. Just speculating.

 

[maxiep]

Another option would be to allow those millions in earnings to be paid out over an extended period, instead of the length of the contract. That could even be a selling points to FAs: "our investment councilors earn the best interest on your defered income."

Of course, Das Kommissar Stern would never allow it.....it would mess with his sacred salary cap.

Zach Randolph's contract had 30% of it deferred and paid out between 2011-2017 IIRC.

 

[maxiep]

I wonder if the franchise would almost prefer them to burn through the cash as quickly as possible, because it might make them more willing to re-up on the extension early, rather than risking free agency.

Also, it seems to me that an older, financially desperate athlete might be more willing to work harder toward the end of his guaranteed contract if he knew he had to get another contract or risk losing his home.

I don't really know for sure. Just speculating.

I tend to look at it the other way: A player with knowledge that he has a plan that will keep him comfortable for life is more likely to be a player focused on basketball and is grateful to the owner that helped him prosper.

 

[mook]

I think that's a good idea. I think college should also institute required money management classes for their athletes.

I think high school should institute such classes for everybody.

It's amazing that we require kids to study the French revolution, but nobody ever sits them down in a class and tells them what craptastic deals things like payday loans or adjustable rate home mortgages are.

 

[Minstrel]

A thing I think the NBAPA should negotiate for in the next CBA is something akin to a required 401(k) plan. A percentage (maybe 5-10%?) of the player's salary each year goes into an escrow fund and is matched by the team. This fund is attached to the player, like a standard 401(k), and goes with the player. Once he's retired, it's distributed back to him over a number of years like a pension.

Since this would cost teams some money, it might be something the owners give in return for the more restrictive salary structure they want. It would also stand the players in better stead long-term, given these statistics.

 

[Ed O]

Another option would be to allow those millions in earnings to be paid out over an extended period, instead of the length of the contract. That could even be a selling points to FAs: "our investment councilors earn the best interest on your defered income."

Of course, Das Kommissar Stern would never allow it.....it would mess with his sacred salary cap.

The salary cap is a fiction, anyway. Veteran minimums only count for so much, as an example, and the cap doesn't take into account insurance money that covers the teams' payments.

If a standard deferment were to seriously be considered, I'm not sure the salary cap would be a reason it couldn't happen.

The thing is that everyone (both money-wise and money-foolish) wants their money NOW. Purposefully delaying a payday "for my own good" just isn't something that I'd be interested in, and it would have to be imposed on the NBA players... and saving the players from themselves is not really a battle worth fighting for NBA owners. It'd be like the players fighting the owners to put a hard cap in place, in some respects.

Ed O.

 

[Shooter]

Imagine if you lost your job and had to start a new career and it couldn't have anything to do with your old one. How hard would it be to maintain your lifestyle?

Not hard at all if I were living a reasonable lifestyle to begin with. All the average player has to do is invest a percentage of his money every paycheck and he's set for life.

Not saying we should feel sorry for them... just that in general I think most of us would be in the same boat . . .

Not a chance. I put 50% of my paycheck into a savings account every paycheck, and invest a significant portion of the rest. I know other people who do the same thing. This idea that all of us would throw away our money if we were rich is nonsense.

 

[mook]

I tend to look at it the other way: A player with knowledge that he has a plan that will keep him comfortable for life is more likely to be a player focused on basketball and is grateful to the owner that helped him prosper.

You may be right in some cases. It makes sense for your franchise players, since you expect to have them around for a decade or more.

Seems like most NBA players only last 2-3 years on any given franchise, so they aren't really long-term investments. If you are flipping employees around that often, does it make much sense to invest in their long-term well-being?

 

[Ed O]

A thing I think the NBAPA should negotiate for in the next CBA is something akin to a required 401(k) plan. A percentage (maybe 5-10%?) of the player's salary each year goes into an escrow fund and is matched by the team. This fund is attached to the player, like a standard 401(k), and goes with the player. Once he's retired, it's distributed back to him over a number of years like a pension.

Since this would cost teams some money, it might be something the owners give in return for the more restrictive salary structure they want. It would also stand the players in better stead long-term, given these statistics.

This would help keep players from starving, but it wouldn't save them from bankruptcy.

If players overextend their credit (houses, cars, babies, etc.) a nest egg that pays out like a pension is most likely going to be a drop in the bucket. If players are RESPONSIBLE with their income, they'd probably be better off having it up front.

Ed O.

 

[Minstrel]

The thing is that everyone (both money-wise and money-foolish) wants their money NOW. Purposefully delaying a payday "for my own good" just isn't something that I'd be interested in, and it would have to be imposed on the NBA players

If it were only a requirement, I agree. That's why my suggestion involves NBA matching...so yes, there's a restriction, but also a monetary gain. I think overall it makes it a plus for players, and therefore worth players advocating for it for their own sake.

 

[THE HCP]

True story, about 5 years ago we were about to head out on a 10 day road trip back east....... when we are about to leave, they hand out the envelopes with per dium. ZBO and Miles are sitting right behind me when they passed 'em out. Darius says and I quote, "What is this shit man!? What am I supposed to do with $1,500!? This ain't shit!"

 

[THE HCP]

I believe one of the classes at the Rookie meetings back in NYC is a financial planning class.

 

[The_Lillard_King]

Can't just pin this on the "dumb athlete". . . you hear about lottery winners blowing all their money as well.

Common story for many to blow their fortune. But on the flip side, 40% are not broke after 5 years meaning many are doing it the right way or at least not the broke in 5 years way.