Many athletes are just too damned young to understand the value of money. They wind up spending millions on unnecessary crap and many wind up either owing millions or declaring bankruptcy. It’s really a sad state of affairs.
To be honest with you I think it really comes down to two things: greed and a lack of education about finance. Now, these are very general guidelines but if athletes follow this five step guide they’ll have no financial issues…ever.
1. Put 80% of your Money into ING or other Savings Account
This goes for celebrities as well but particularly for athletes who don’t know any better. If you’re young and making millions upon millions of dollars there’s zero reason to risk any of it or get greedy. Put it somewhere where you can’t lose any of it, not somewhere where you’re trying to double it. If you have 10 million in an ING account you’re earning over 100K a year on interest alone. Some people are so stupid it bothers me.
2. Do not under any circumstance invest in the stock market
The stock market today is pure gambling. What once seemed a solid investment and something as safe as investing in the S&P over the long haul is now something even the “experts” couldn’t predict if they tried. Chances are the experts know less or as little as you do. If you guys are going to gamble on anything outside of your athletic career at least buy real businesses like Jamal Mashburn did. Guy owns 37 IHOPs. Now that’s smart.
3. Set Aside a “Fun Budget” Not to exceed 5% of earnings
If you insist upon doing stupid things with your money, fine. At least set aside a budget that you can’t pass. Again, I use the 10 million example. That gives you 500K to spend on weird bear rugs and unnecessary perks for your home. If you insist on acting like a kid then fine. At least be “adult about it.”
4. Buy Your House in Cash
At least the house is yours and all you’ll owe is taxes every year. Now most accounts would disagree because if you’re paying a mortgage you get tax benefits. But come on. Most athletes don’t know this stuff and never pay attention. If you don’t pay attention then make it so you don’t have to. If you buy the house in cash at least you have an asset and it’s paid for. Too many athlete homes go up for foreclosure and whenever you first hear about athlete troubles their house is the first thing to go. Just lay out the money since you have it anyway.
5. No Whores
I got one word: lawsuit. It’s not that I’m saying you can’t pay a G for a high priced hooker. But it’s gonna come back to bit you in the ass with legal fees. I’m sure 100s of athletes can attest to that one.