There is something to be said for slow and steady growth when it comes to your wealth. Several weeks ago we wrote about former NBA player Vin Baker’s financial disaster and rehabilitation. While Baker’s story was certainly sad, it turns out it isn’t an unusual tale. Professional athletes and celebrities (and lottery winners) tend to get rich quick. However, the sudden burst of fortune is more often than not seriously short-lived, and the wealth disappears almost as quickly as it appeared.
The sudden misfortune is so common that financial advisors can “predict with near certainty just how fast these groups will lose their money. According to Sports Illustrates, 60 percent of former professional basketball players are broke within five years after retirement, with joblessness and divorce being prime factors for mismanaging their wealth.”
Former linebacker Bart Scott said in an interview that, “You give a 19-year-old a check for a million dollars, he thinks it is a million dollars.” Scott was a linebacker for the NY Jets and Baltimore Ravens from 2002-2012. He had a total career earnings of $61 million but he didn’t understand the value of a dollar or money management until he actually left the field. “You learn about taxation. You learn about insurance. You learn about how to protect yourself and how to have an emergency fund. Unfortunately, as athletes we never see the end coming, so when you start understanding that [you] have to make this money last, because most of us have to go out and get another occupation when we finish.”
Players (and other celebrities—we’re looking at you 50 Cent) too commonly lose their fortunes due to poor money management. The excessive shopping sprees, amassing huge amounts of debt, using unscrupulous advisors that cheat them, and making terrible financial choices add up quickly. The National Bureau of Economic Research found that 15.7 percent of National Football League players filed for bankruptcy 12 years after they retired, while many struggle financially after retirement.
The struggles these players and celebrities encounter translate to the same things regular people do financially. The mistakes of money management like poor investments, financial mismanagement, and failing to make informed money decisions add up—for everyone. Scott now works with a program to educate athletes about how to properly manage money for the long-term, but his big piece of advice is simple: “Start having the conversations with your kids at an early age on how to respect money and see it as a resource, not the end all be all.”
Good money management pays and there is no salary big enough to account for excessive spending and limited saving. If you want to start making savvy financial choices to protect and grow your wealth in the long term, call an expert at Apex Financial Advisors today. Our experts can help you avoid the big money mistakes that cost even the wealthiest celebrities their fortunes.