Whatever You Do, Don’t Manage Your Money Like Many Professional Athletes

Photo by yoyo du 33

Photo by yoyo du 33

From Riches To Rags

Broke. Tapped Out.

Would it surprise you to know that some of the greatest athletes of the last 40+ years are now poorer than dirt?

I’m talking athletes like Mike Tyson, Johnny Unitas, Latrell Sprewell, Dorothy Hamill, Scottie Pippen, Evander Holyfield, and Michael Vick.

All of these famous, well accomplished athletes have made millions upon millions of dollars in their careers, and what do they have to show for it? Not a whole heck of a lot.

On a percentage basis, professional athletes are the WORST money managers.

I recently read the following statistics when it comes to professional athletes and money: Around 78% of NFL players and 60% of NBA players go broke within five years of leaving the field, according to a Sports Illustrated estimate made in 2009 (Source: UK Guardian).

Just look at the life of professional boxer Mike Tyson.

At the height of his career, here’s what Mike was able to accomplish. He was the undisputed heavyweight boxing champion of the world. He was the youngest man to ever win the WBC, WBA and IBF Heavyweight Titles. Finally, he was the first man to win 12 of his first 19 fights in the first round by KO. His estimated lifetime earnings range from $300-400 million.

Yes, you read that correctly, $300-400 million!

But then, the wheels came off and his life fell apart. Mike Tyson’s story reads like the Great American Tragedy: domestic violence, bad press interviews, the death of his father-figure trainer, a nasty divorce, a federal rape charge, felony possession of drugs, a DUI, and a bloody ear incident.

And, at one point after this whole mess, Tyson was worth less than $700. Now, how in the world do you go from $300 million all the way down to less than $700?

3 Ways To Go Broke Quickly As A Professional Athlete

When you investigate the lives of professional athletes who have gone from millions to bankruptcy, you can definitely see a pattern that led them down a bad financial path. If I had to pick three areas that led these athletes in the wrong direction, then here are the three I would list:

  1. Fast Living. Sex, drugs, and rock-n-roll. If you want to make millions of dollars and lose it all, then simply live fast and loose. In this way, you can lose your career faster, go to court, land your butt in jail, get divorced, and then pay millions in alimony and child support. Yeah, that’s pretty easy to do.
  2. Toy Gathering. Expensive luxury cars. Multi-million dollar homes. Massive yachts. These are the high dollar items that get many athletes in trouble. But, this is what happens though when young athletes go from financially poor to massively wealthy as soon as they sign on the dotted line of an incredible contract deal. They don’t know how to handle that kind of wealth. So, they run out and go on spending sprees. Plus, they end up spending more than they actually make on stuff that will sharply go down in value within a few short years.
  3. High Risk Investments. Getting investment advice from those people closest to you (family and friends) is always a bad idea. But, when you look at these riches-to-rags athletes, this is definitely what you observe – rich people taking investment advice from other people around them who are just plain money hungry. Bad restaurant deals are pretty typical with athletes. The restaurant business is a brutal industry and not a wise place to invest large sums of money.

Questions: Ok, so you’re not a wealthy athlete, but are you making some of the same mistakes as these athletes? Are you living a questionable lifestyle that will damage your finances at some point in the future? Are you buying a bunch of stuff that is dropping like a rock in value? Are you making any risky investments that will come back to bite you in a few years? What decisions do you need to make, today, in order to put yourself in a better financial position?






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6 Areas To Be A Better Money Manager This New Year

Photo by 401(k) 2013

Photo by 401(k) 2013

It’s A Great Time To Make Some Needed Changes

We’re at the beginning of a new year, and it’s a great time to make some needed changes in our lives. Personal finance is always one of those areas that needs regular attention and maintenance.

With a few tweaks, a few small occasional changes from time to time, we can all be better managers with the finances and resources God has blessed us with.

Here are six areas in which we can be better money managers this new year.

6 Areas To Be A Better Money Manager

  1. Always be working on two budget spreadsheets each month. Now, I know what you’re thinking. You’re probably having enough trouble just producing one cash flow spending plan a month. I’m always tweaking my current month’s budget based on any unusual changes in income or outgo. Plus, I’m usually doing some initial financial planning for the month that’s about to follow.
  2. Give at least 10% of your money away. Related to the first point, be sure to plan to give at least 10% of your money away. The tithe (10%) has always been a useful giving tool for the Jews as well as the Christian Church. So, if you’re Jewish, then you can give your tithe to your local synagogue. If you’re Christian, then you can give back to your local church. If you’re not a believer, though, then I would encourage you to give back to a charity or cause you believe in. The Law of the Harvest works whether you are a believer or not.
  3. Avoid debt at all costs. One of the ways rich people get rich is by avoiding debt like the plague. If you currently have some debt, then do rich people stuff this year and get your family out of debt as fast as possible.
  4. Be sure you have the proper insurances in place in order to protect your family. Did you know that the #1 cause for personal bankruptcies in the United States is due to medical expenses? The role of good insurance is to protect your family’s assets from a major financial life event, such as medical emergency, automobile accident, death, house fire, and so on. Make sure your “financial house” is in good order with quality insurance in all areas. You don’t want to become part of these statistics.
  5. Focus on both production and wise management. The people who make money and have money stashed away for a rainy day are focused on two main aspects of personal finance. The first is production. They understand the importance of having a number of personal income streams. They have 2-3 sources of financial income, which could include a full-time job or business, a part-time job, a side business, passive income streams, and so on. Second, wealthy people also do an excellent job of wisely managing all of their streams of income. They leave nothing to chance.
  6. Don’t leave “money on the table” that you can put to good use. My wife is really good at this. Here’s what I mean. Be sure to get the very best price on every good or service that you purchase. If there’s a rebate involved, then make sure you mail those in so you can get your money. If an item you just purchased goes on sale suddenly, then go back to the store and get a price adjustment. Be a firm negotiator in all your spending.

What Areas Do You Need To Focus On?

So, how are you doing in these six areas? Are you doing a good job in a few of these, but not so hot in some of the others? Are there some other important financial areas that I may have missed in this post that you are planning to improve upon this year?

Let’s all avoid any personal “financial cliffs” in this new year. Focusing time and energy in these six key areas will be a great way to do so.