By Constantinos Massonos, Contributor
It’s always big news when famous athletes, who were once at the peak of their sport, find themselves in a tough financial position that forces them to declare bankruptcy. Stories of how the mighty fall will always attract the public eye. Sadly, the unique nature of the athletic profession that we have addressed in a number of our previous blog articles, makes athletes quite prone to bankruptcy after the end of their athletic career.
Although research is limited and not up to date, the numbers are really depressing. The much-cited Sports Illustrated research into former athlete finances, in 2009, showed that after just two years of retirement 78 percent of former NFL players were stressed financially or had gone bankrupt, while sixty percent of former NBA players were broke within five years after their retirement. The stats are not different at the other side of the pond, as a research by Xpro in 2014, a charity that helps former UK professional players adjust to life after football, showed that about 40% of former players that used to earn huge salaries back in their Premier League days went bankrupt within five years after they stopped playing.
So, why do so many professional athletes find financial hardship after living a life of excess and splendor?
Part of the answer lies in the question. Athletes are expected to follow a certain lifestyle that comes with the high income and celebrity status they enjoy because of their athletic fame, usually from a very young age. If an athlete is already living paycheck to paycheck during his or her professional career it is certain that trying to maintain the same lifestyle after their playing career is over, will lead to financial havoc.
The above lifestyle also includes athletes who have multiple romantic partners or wives and a number of children with each of them. In the absence of a prenuptial agreement, which is the case in most of these relationships, athletes are obliged to pay substantial amounts of money for alimony and child support payments on a monthly basis; payments, which usually athletes will not be able to continue supporting after their retirement.
The majority of athletes will also fail to recognize how close to retirement they are, failing to plan and budget, save and invest money, to have a comfortable transition to their life after sports and the retirement they deserve.
But even athletes who take the time to plan for their future, are faced with the challenge of choosing the right people to put their trust on for managing their finances. Unfortunately, most athletes, have very low levels of financial literacy, becoming easy targets of shady financial predators who usually suggest to them a ‘’guaranteed’’, ‘’sure money’’ investment to put their money in, leaving them moneyless in retirement.
Of course, bankruptcy is not and can’t be the end of the road for any athlete. The notorious boxer, Mike Tyson never gave up despite declaring bankruptcy in 2003 after lavishly spending an estimated 300 million dollars. He found the way to fight back and become a millionaire again, even recovering from a debt of around 18 million at one point.
While Tyson’s way is the hard way, financially educating athletes can help them understand the importance of planning for retirement and teach them to avoid financial pitfalls.
For more information on financial literacy courses for athletes you can contact us at [email protected]
