The California Attorney General’s office has announced the arrest of two insurance agents on 57 counts of grand theft, elder abuse, burglary, conspiracy and securities fraud. Officials connected to the case state that two men, Edwin Salazar of Downey and Michael Zuniga of Fullerton ran a two year $1.3 million Ponzi scheme targeting Hispanic investors, …
Month: June 2012
Why Pro Athletes Suck at Money
What is it about professional athletes that make them so bad with money? It’s almost cliché to talk about the ex-MLB player who blew his fortune on ridiculous investments or the former NBA superstar who lost everything in a nasty divorce. While the rate of ex-player bankruptcies are higher than ever before thanks to the global financial crisis, reports from a variety of sources show that ex pro-athletes have always been bad at handling their money. According to a 2009 Sports Illustrated article 78% of ex-NFL players are bankrupt within two years of retirement. Figures from the NBA Players’ Association show that 60% of retired NBA players are broke.
While it’s easy to point and laugh at irresponsible millionaires throwing their money away, it ignores the underlying institutional problems faced by many athletes once they retire. To put it simply, many pro athletes are wildly out of their depth when it comes to handling finances. Most are signed up to lucrative seven figure contracts straight out of college or, in some cases, high school. Many come from modest to poor backgrounds and have had no experience in managing a check book, let alone investing millions of dollars.
The average career lifespan of a professional athlete is much shorter than that of other working professionals. A plumber or accountant will have anywhere from 30 to 50 productive working years in his or her life. The NFL’s own statistics show that the average player’s career lasts from 6 to 10 years, with most players having a peak earning period of 3.2 years. NBA players have a career lifespan of 5 years or less (source) while an average MLB career is 5.6 years (source).
When examining pro athlete bankruptcies, similar patterns start to emerge. Here are four recurring reasons why so many ex players go broke, along with some prominent examples.