Rich But Financially Inept
| May 12, 2009 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
Great Athletes With Greater Financial Problems
There are plenty of examples of athletes who allowed their finances to go into disarray. Two very prominent ones are Mike Tyson and Evander Holyfield.
Mike Tyson
During the course of his meteoric rise to the Heavyweight Champion of the World, Mike Tyson earned hundreds of millions. His earnings were about $400 million, yet he still managed to squander so much money that he ended up bankrupt. Sure he had jewelry, mansions, cars, limousines, parties, expensive clothing, motorcycles and Siberian tigers, but he also had tens of millions in debt and bills that he couldn’t pay. Ultimately, he ended up filing bankruptcy in 2003, stating simply, “I am unable to pay my bills.”
Evander Holyfield
Another sad example is Evander Holyfield. At 46, he is still fighting, which is impressive. Honestly, I am a fan of his. Not only is he a champion, but he is pretty generous. A few years ago, he personally donated several thousands to my church. However, he presently has some real financial trouble. His $10 million, 54,000 square foot Atlanta home is reportedly in foreclosure, and he is being sued for half a million for landscaping.
Rule-Defying Athletes
Of course not all athletes follow this path. Some do retire and remain very wealthy. Herschel Walker, for example, was able to translate the discipline he exercised on the field to build a successful food service enterprise. A mega-success story is Magic Johnson, whose business empire is worth over $700 million. In fact, Johnson’s brand of social entrepreneurship has changed some communities from destitute to thriving. Clearly, there’s something that separates those who can make the transition from sports to business (or even normalcy) and those who suffer huge financial setbacks once they retire.
Why do athletes go broke?
- Poor spending habits. One reason some athletes go broke is poor spending habits. You can only out-earn stupidity for so long. If you have poor spending habits, even a 7 to 9 figure income won’t sustain you because you will literally spend whatever you take in. Your wealth will be easily spent on cars, jewelry, partying, and your entourage. All too often, people go broke trying to look more prosperous than they really are.
- Moochers. There are several “friends” and family members who take advantage of these high-income earning athletes. Unfortunately, one of the biggest mistakes is the mistake of trust. Many of those who are a part of these athletes’ lives expect to be taken care of. The sad truth is people really do treat you differently when they perceive that you have money. I recall one friend saying how shopping attendants and store owners bend over backwards to supply his every whim because they know he may drop $30-40K in just one visit.
- Bad Advice. Everyone likely has a broke relative who tries to give them financial advice. However, what do you do when advisers with all the appropriate financial credentials are telling you that you can become even more wealthy by following them or will be financially lost without them. Many athletes are deceived into thinking that these advisers have their best interests at heart, yet some of these advisers are terrible. Marie Osmond recently credited bad financial advice as the cause of her family losing $100 million. Oprah Winfrey has been quoted saying one of the best financial lessons she learned was to sign every check. Remember, they call these guys “brokers” for a reason… they make you broker.
- Lacking Adaptation. The biggest problem I perceive is the lack of ability to adapt one’s lifestyle when one is not earning those huge paycheck. Although some lavish spending may be deemed as wasteful by some, if you are making 8 figure, you can afford lavish. However, once you retire and are making substantially less, you have to adjust your expenses accordingly. This is where many miss it: not realizing that the ride is over.
- Keeping Up With The Joneses. Additionally, professional sport figures often associate with other very high income individuals. It is easy to get drawn into overspending because everyone around you is. I is also difficult to admit you are a financial fake because you are borrowing to have a lifestyle that you cannot afford.
We should care about athletes going broke because financial difficulty after rapid prosperity is definitely not isolated to professional athletes. Consider countless celebrities, lotto winners, and even people in your own life who might have come into a little money at one point. The truth is money merely magnifies what’s already there, so if we’re poor financial managers with our present income, then it will be hard to make smart money decisions once we have a lot more. He that is faithful in little will be ruler over much.
Now, it is true that most athletes and entertainers have added stresses (i.e. fame and public disclosure of salaries) not experienced by most of us. However, that does not negate the fact that we can still fall victim to the same traps that keep many of them broke after retirement.
At some point in our lives, we all may come into a lump sum or two, and hopefully, we will be able avoid making some of the same mistakes that causes athletes to squander their fortunes.
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Copyright 2012, Roshawn Watson, Pharm.D., Ph.D. All Rights Reserved.
I, for one, don't feel sorry for them in the least bit. However, your article brought up some interesting points about the "struggles" some of them may face.
I think athletes and high income earners need good coaches to help them manage the responsibility.
I do think they need coaches not advisers. I think they need to be the one to make the decisions ultimately. Unfortunately, many of them are pretty young and not ready for the responsibility.