Professional athletes perform jobs that only a select few can accomplish — and are paid handsomely for it. Fans follow players’ every move on the field and, when things sometimes go wrong, away from the arena.
Many athletes begin playing for a living while they’re still teenagers; others spend cursory stints in college due to pro leagues’ rules preventing earlier entrance. Consequently, most athletes aren’t trained to effectively budget their considerable earnings.
Examining some notable financial blunders can help us avoid similar, smaller-scale pitfalls. Here are four former athletes we can learn from:
The All-Pro Bankruptcy Team
- Boxer Evander Holyfield accrued about $250 million in earnings as a world heavyweight champion. Unfortunately, “The Real Deal” found ways to burn through it all. Lavish spending on a 254-acre estate, as well as fathering 11 children with numerous women, eroded his empire. The fighter eventually had to liquidate everything.
- Not to be outdone, Holyfield’s former foe, Mike Tyson, made even more, amassing more than $400 million. “Iron Mike” bought houses, cars, and even pet tigers. Tyson’s legal troubles involving sexual assault, divorce, and back taxes eventually sank the former heavyweight champion.
- Pro football Hall of Famer Lawrence Taylor was notorious for his cocaine habit (he once estimated spending several thousands of dollars per day on drugs) and womanizing at the height of his championship career. He later founded a business worth more than $10 million, but due to legal troubles and tax evasion, “LT” lost everything.
- Former major league pitcher Curt Schilling was a noted competitor during his fabled career. Upon retirement, the Red Sox legend founded a video game company. His 38 Studios inked an economic incentive with the state of Rhode Island worth $75 million. A few years later, the business drowned in red ink, leaving Schilling, former employees, and government officials to argue over its demise.
You might be asking, “How could these stories resonate with regular Americans like me who are making far, far less?”
The answer: a lot more than you’d think.
Problems Are Universal
I previously discussed the “why” behind many NFL players finding themselves in bankruptcy. Examine the issues facing the men mentioned above. At their roots, those issues aren’t all that different from those plaguing much of the population: overspending, divorce, back taxes and tax evasion, fatherlessness, substance abuse, or bad investments draining a life’s worth of savings.
Top athletes don’t just perform at a high level; they often feel compelled to spend enormously, too. When you’re making tens of millions in one prizefight, who wouldn’t want a few white tigers around the house? We laugh, but poor financial management can hurt anyone, regardless of income.
Sometimes being afraid of losing such vast wealth or helping friends are the things that drive players into financial failure. Investments pitched as a sure thing or involving those close to the athlete become a money pit, siphoning away what they were supposed to protect. These aren’t always high-dollar investments such as Schilling’s gaming company; having many people ask for a few thousand here and there drains the coffers just as easily.
Holyfield’s tendencies with women illustrate a common problem, as child support and divorce loom large on society’s financial ledger. For the average American earner, how much money is really left after taxes, rent or mortgage, utilities, and regular bills — all before alimony payments? While star athletes are buying Bentleys, you may be considering a sports car…or a Kia. When your margin is thin, every penny counts double.
How to Avoid Their Plight
The same principles that could save many pro athletes from bankruptcy and embarrassment are the ones you should also employ:
- Have a financial plan, and stick to it. Monitor your monthly expenses, looking for unnecessary purchases. If you desire a big-ticket item like a new car, save toward that goal, and consider whether it’s really worth the money.
- Keep your circle small, and don’t fear saying “no.” Everyone has relatives who, at some point, face financial trouble. But how many can you help before it hurts your savings? Even giving away small amounts here and there adds up.
- Child support is expensive; birth control is cheap. Don’t have kids you can’t afford — especially if you’re unmarried. Estimates say it now costs about $250,000 to raise a child from birth until age 18. If you can’t afford basic birth control, how can you reasonably support another human being?
- Play it straight on taxes. Don’t hide income sources from your spouse, your business partner, or Uncle Sam. If you don’t feel equipped to do your taxes, hire an accountant or tax service.
While the lavish lifestyles of professional athletes are alluring to adoring fans, the truth behind the scenes is the same: For most people, such living can’t be sustained. Use common sense, budget, and take advantage of birth control. A responsible lifestyle and financial outlook are worth far more than any victory on the field.
Daniel Wesley is the founder of creditloan.com, the preferred choice by consumers who want to learn about all things credit and loans.
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