Why Rich People Go Broke

I was reading Sports Illustrated, and I came across this statistic:

78% of former NFL players go bankrupt or are under major money stress due to joblessness within 2 years after retirement. 60% of NBA players are broke within 5 years after retirement.

Does that surprise you? It didn’t surprise me that a lot professional athletes end up squandering their wealth after they retire, but this number really caught my attention. How can it be that almost 4 out of 5 NFL players bo bankrupt? I think there are several reasons for this:

• Lack of Financial Education. NFL players go to a rookie orientation for one weekend before they start their career in the NFL, and they touch on money management for about an hour, and that’s all they get for the rest of their career. It’s not the job of the NFL to teach grown men how to handle money, but the overall lack of personal finance education in America is severely deficit. Think about it, you’ve got a young man who was eating Ramen noodles one day, and now he’s getting $200,000 paychecks every other week. It’s not much different from winning the lottery, except you have to go to work every day and destroy your body.
• Materialism. They get caught up in having the finer things in life, which is perfectly fine, but when the paychecks are reduced after retirement, it’s tougher to maintain the same standard of living. Athletes are not adjusting their lifestyle for the reduction in income.
• Lack of Investment. Professional athletes are obviously not investing in long-term assets such as growth stock mutual funds and real estate. If you want your money to outlive you, you must invest it in assets with long-term growth potential and a track record for strong growth.
• Lack of Planning. Setting up a long-term financial plan is essential to maintain your wealth. Wealthy people need to spend the money to surround themselves with a good attorney, accountant, and insurance professionals to help them with proper estate, tax, and insurance planning. One large medical expense or tax bill can significantly reduce one’s wealth.

It was sad to read about athletes squandering their wealth, but how can you feel sorry for them? At some point, we must take personal responsibility for our actions, and that is why you should not blame anyone but yourself when it comes to your current personal financial situation. Take charge of your situation. Get out of debt, and create a plan to build wealth!

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