Financial failure is not usually caused by a sudden event, but from a constant series of bad decisions. Our short research reveals a combination of factors that contribute to the financial failure of most athletes.
Athletes usually earn substantial amounts of income within the limit of a short time span, usually 10 to 15 years. Most of the time the athletes’ salaries are not fully guaranteed and poor performance, injury, on and off field behavior can adversely affect their earning capacity. The end of the athletes’ field play usually marks the end of the substantial earnings.
In addition, athletes earn their money at a very young age, away from their home countries as most of them are offered lucrative contracts abroad. Being away from home and the shelter of their families puts a lot of pressure on young athletes who tend to overspend to compensate for things that are missing in their lives, such as family and friends.
The high income and celebrity recognition that athletes enjoy at an early age, leads them to adapt a lifestyle of the rich and famous, living paycheck to paycheck and blowing their money on depreciating assets instead of putting it away. The effect of sudden wealth or “sudden money” cannot be handled appropriately, especially by young athletes, who are completely inexperienced in handling finances.
Family, friends, coaches and others who might help an athlete reach success usually seek financial rewards and returns as recognition of their contribution to the athlete’s fame. And if an athlete decides to have his own family and doesn’t really work out, divorce has a disastrous effect on his financial well-being, as he or she might not have a prenuptial agreement in place before getting married. In addition, a number of athletes have children from multiple wives and they are obliged to pay several monthly alimony and child support payments, which are quite substantial.
Career athletes often do not have the same level of financial literacy as people who took more conventional career and education paths. The unique financial challenges that come from life as a professional athlete, combined with the lack of financial education, usually lead to poor financial decisions which, unfortunately, have an adverse lifelong impact. This might include putting trust in the wrong people and choosing bad Investments. Advisor improprieties and misappropriations of funds can contribute to the financial problems of professional athletes.
So how can we take preventive action against the financial failure of athletes? Many of the factors that make athletes financially vulnerable cannot be altered. Athletes will always have a family, will always have friends and other relationships, and will always have to make decisions for themselves.
We believe that the solution lies into educating athletes so that they acquire knowledge about money, personal finances and financial options thus giving them the tools to make wise decisions concerning money. Financially educated athletes will be able to react in a more prudent manner to situations arising from financial pressures or which involve financial decision making.