60% of all NBA players end up poor

http://www.cnbc.com/id/42766400/?slide=1

by hezekiah • 15 years ago

61 45 15 years ago

dlikhten• 15 years ago

Cool. Not a big surprise. Take a person who is focused on playing sports, sports, sports, training, sports, and oh yea, training who also is poor, and shove money in their face the thing they will do is buy everything they could.

The problem is that most people didn't get the necessary financial education.

The bigger problem is that I doubt these people are very good at math and financial management so they probably ignored the warnings of "I need x dollars per year to sustain this life style, if I get fired tomorrow due to uncontrollable circumstances I am fucked". In the end lots of money needs investing. This is a problem for the middle class and even bigger for the upper.

streptomycin• 15 years ago

Another large factor is that, often when athletes realize they need to save/invest money, they get scammed in bad investment deals. A shady businessman will hire a former athlete as a representative to sell risky investments to current athletes, who then lose tons of money even though they were just trying to invest their money for the future.

hezekiah• 15 years ago

I have seen this literally - it's low down but it does happen.

peterb• 15 years ago

It doesn't just happen to athletes. I saw the same thing happen in the high tech world during the dot-com bubble.

vannevar2• 15 years ago

The article quotes a statement by the NBA Player's Association to that effect, but does not substantiate it. As far as can be determined by a Google search, no one ever corroborated the claim and since the Player's Association has a vested interest, I wouldn't trust the assertion.

radioactive21• 15 years ago

Not a surprise at all. I have read many stories like this and the problem is that many of them come from poverty. They get money and they feel very guilty, so they give money to any friends or family that asks. This is why many have such huge entourages.

One player was paying rent for 15 of his friends. It wasn't some cheap place either, but at high rises in a big city.

He also paid for 20 cell phone bills, on top of buying house for his parents, brothers and sisters. Paying all the bills eating out with his close friends, paying for rides and flights.

jgmmo• 15 years ago

This is just like the studies of lottery winners.

"Nearly one-third of lottery winners become bankrupt.

“The CFP Board made an offer to the National Association of State and Provincial Lotteries to provide the organization's members with information to distribute to winners. The Investment News article highlighted the lack of financial guidance many winners receive from state lottery agencies; estimates show that nearly one-third of lottery winners become bankrupt.” Source: Certified Financial Planner Board of Standards, Inc http://www.cfp-board.org/bulletin.html

more studies on lottery winners: http://answers.google.com/answers/main?cmd=threadview&id...

jfruh• 15 years ago

It's also worth remembering that a pro athlete if he's lucky has a career that lasts 15 years, tops. Most play significantly less. Contrast that with the average person's working life, which usually lasts 40-50 years. So sure they make a lot per year but once they're done, they're done, since they tend not have much by way of marketable skills. Saving and investment is the smart thing to do, but it's also a difficult thing to tell a 21-year-old who suddenly has more money than he's ever seen in his life.

xentronium• 15 years ago

> So sure they make a lot per year but once they're done, they're done, since they tend not have much by way of marketable skills

More often than not, players become coaches or bureaucrats in the corresponding sports organizations.

bmm6o• 15 years ago

I think "More often than not" vastly overstates it. It's much more common in baseball, with its extensive farm system, or football with the large number of position coaches, but even there it's the exception rather than the rule.

aklein• 15 years ago

Also, earning $10 million over 15 years is far less tax efficient than earning that same amount over 50 years: you keep less of your income by a few marginal tax brackets.

goalieca• 15 years ago

But it's far more investment efficient!

pbhjpbhj• 15 years ago

>$10 million over 15 years is far less tax efficient than earning that same amount over 50 years

// Presumably you're ignoring investment even at bank base rates?

hristov• 15 years ago

It is much worse than that. The average NBA player's career is very short. About 4 years, last time I checked. And if you remove the stars that can last 15-20 years, you get a lot of people that play for 2 years and are dropped due to injury or just not panning out.

And after a player is dropped from the NBA you get someone that has devoted their entire life to playing in the NBA and does not have any other job training. There are other leagues in other countries but they are few, have limited spots for foreigners and usually and do not pay very well.

jhamburger• 15 years ago

What exactly is the definition of "broke"? Declaring bankruptcy and having your house foreclosed doesn't mean you're broke like a homeless person is broke.

AlexMuir• 15 years ago

http://retardzone.com/2008/09/23/abandoned-mike-tyson-mansio...

For an idea of where the money goes.

antidaily• 15 years ago

One can only imagine the amount of fornicating that went on in that pool room.

jedberg3• 15 years ago

What I don't understand is why the players association doesn't do something about it.

In theory, they could do something like this: All monies paid to players go into a common fund, which is managed by the player's association. Each player gets a small stipend from this fund for entertainment and housing. The rest remains in the fund, and the player gets a statement every year showing how much they earned from playing and how much from investing. Hopefully, after a few years, the investing is making more than the playing, showing the player that investing is good.

Then upon retirement, the following happens. 2 million is set aside and put into a fund. From that fund 5% is paid every year to the player, with the rest being reinvested. Then the rest they can choose to either remove from the fund, or keep in the fund and get earnings payments, or maybe take some out and leave the rest. The hope being that they saw their statements and know that investing is good.

But even if they don't, they still get that 5%, which starts at $100K/yr and in theory goes up with inflation, which should be more than sufficient to keep them from being totally broke.

They could do the same for football players, who tend to have the same issue.

cheez• 15 years ago

They they wouldn't be ballers. Just people with a job.

But seriously, they should have some kind of program.

jedberg3• 15 years ago

A job with an amazing severance.

roldon332• 15 years ago

That is a good idea. However there would have to be some way that they could prevent players from signing away their rights to that income.

prawn2• 15 years ago

Doesn't sound too cool (was going to say gangsta) and I doubt young players would go for it. The majority want it all right away.

amattn• 15 years ago

The NBA has a pension system for its players. It more or less does what you talk about. If you play for 13 years or so, I believe you get 50k a year if you retire or something to that effect. The longer you play, the higher the pension payout is.

jedberg3• 15 years ago

Kind of what I'm proposing, except that they would get a lot more money on retirement and hopefully learn the value of investing along the way.

spitfire• 15 years ago

The NHL has a financial education program for new players. iirc it's a required "course" to be an nhl player now.

protomyth2• 15 years ago

It's not a bad idea, but the implementation will never happen. I can see the politics of the suggestion going bad very fast with accusations of racism. Not fair, but the spin would make some money so it will happen.

Incidentally, the government tried this with the Native American land profits and it has all turned bad with ongoing lawsuits and some serious settlements.

BenOfTomorrow• 15 years ago

They need education most of all; there's a number of articles out there detailing the predatory businesses and people milking money off professional athletes. It's not just that they buy extravagant goods, but they pay for them with horrible loan terms, and the debt runs away on them. Here's an example:

http://www.thepostgame.com/features/201104/tpg-exclusive-cas...

I wouldn't be surprised if the player's associations already sponsor financial training seminars; can't force them to learn, though.

OstiaAntica• 15 years ago

The players' agents have a role and responsibility here too. ESPN should put together a list of the destitute players and who represented them.

nh2• 15 years ago

Most NBA players are scouted from very early on (AAU), then to college for 1 year, then to NBA. They do not get a chance to learn about how to manage money (compared to a regular joe: summer job, internship, etc..).

Most of the inner city kids have a distrust of "the system" or "the man". Therefore, they would never trust their income to a players assoc.

Whats should be done is to establish a class on How to Manage Your Money 101 by the league/PA.

Here is a article from SI on 'How Athletes go Broke' http://sportsillustrated.cnn.com/vault/article/magazine/MAG1...

smallblacksun• 15 years ago

The NBAPA has had a Rookie Transition program which deals in large part with money management for the last 25 years. The NFLPA has a similar Rookie Symposium.

Rariel2• 15 years ago

"Most NBA players are scouted from very early on (AAU), then to college for 1 year, then to NBA." This is completely untrue. Players that go to the NBA one year out of college are the exception and not the rule.

rubashov• 15 years ago

The league is still busy trying to tackle the problem of keeping players out of jail. Maybe retirement plans are next on the agenda. I'm by marriage related to a recently retired NBA player employed by the league with the job of giving retarded simple advice about keeping out trouble and paying taxes, and so forth.

Anyway, the color of this problem of stupid decisions with large pro sports salary money is black. The cause is the disintegration of the black nuclear family. If a dumb white kid makes it big in baseball or the NFL, some reasonably successful uncle or cousin will come out of the woodwork to offer good advice. The dumb black kid, with just a mom and no functional extended family, will be prey to all kinds of hucksters.

There's plenty of literature about how these athletes lose their money: they get taken by local businessmen on deals for things like car washes and restaurants. They don't know how to value a business and they don't trust national financial markets, so they get soaked by local operators who trick them into trusting.

patio11• 15 years ago

I don't doubt that that is a better default, but I guarantee you that someone who understands money is going to offer them the same reverse annuity deal that unwinds the same protection for lottery winners. "Why get dribbled out a mere $200k for life when I'll put $2 million in your hand, cash, tomorrow? You think Jordan had to save to buy his crib? You earned that crib, dawg!"

vannevar2• 15 years ago

They did---it's called a pension plan, and it's quite generous if you managed to play for at least 3 years.

http://www.nytimes.com/2009/12/13/sports/basketball/13pensio...

protomyth2• 15 years ago

nice article on the MLB pension plan with mentions of various other leagues: http://www.businessinsider.com/nfl-nhl-nba-mlb-retirement-pe...

[add link] http://www.thestreet.com/story/10983698/1/even-pro-athletes-...

rickdale• 15 years ago

The fault doesn't fall 100% on the athlete. Bad loans, high risk loans, were given to these people just like the rest of America but on a much larger scale. Yes I agree they spend lavishly, but all of them have over financed themselves!

daimyoyo• 15 years ago

I think that anyone who comes from lower to middle class backgrounds and makes a substantial amount of money quickly faces the risk of losing it. Lottery winners, people who receive large court judgments, and pro athletes have consistently shown that as with most things, large amounts of money can be easy come, easy go.BTW: The NBA player turning down a $30Million contract and then going broke is quite funny to me.

redthrowaway• 15 years ago

Not surprising. Many of these players come from a lower class background where financial literacy is not taught to them. They likely got through school with the minimum of effort, protected by coaches, teachers, and administrators because they "were good ball players". If they went to college, it was on a basketball scholarship where their preferential treatment would continue.

In short, they've never had to think about anything besides basketball. They go from rags to riches without anyone telling them the obvious: it won't last. Their heroes spend big money on flashy cars and houses, and when you're staring at a seven figure cheque that might seem like a good idea.

They likely grew up in a household where their parents lived paycheque to paycheque, and simply being able to provide for yourself and afford luxuries was considered being smart with your money. They probably thought of their houses and cars as investments, because thinking of them as million dollar wasteful extravagances is depressing. They wouldn't have made the connection that an investment is not something that's expensive, it's something that makes you money.

The average NBA player is raised to play basketball, and that's it. They end up being very good at basketball, and little else. If they are amongst the small cadre who think about life after basketball, then they likely won't be broke. It doesn't even take any special knowledge to be able to live well off $100M in career earnings. They just need to go to a financial adviser and have someone else look after their money. But they don't.

Rariel2• 15 years ago

Maybe I'm missing it, but where is the article? All I see is a slide show about 15 athletes that have gone broke. Google didn't return anything recent. Can somebody reply with the link?

nestlequ1k• 15 years ago

Good content, unbelievable inept slideshow implementation. Takes 5-10 seconds to load every time you click "Next". CNBC has a really shitty web development team.

Also, completely busted on android/iphone.

nazgulnarsil• 15 years ago

you can give a poor person money but you can't make them wealthy.

phamilton• 15 years ago

A family friend of mine is Mark Madsen. After 9 NBA seasons (with 2 championships) and an average of 11 minutes per game, he entered Stanford's MBA program. That's a pretty smart way to play. Even if he wasn't a star, he's doing well for himself, with the future all the more promising.

WettowelReactor• 15 years ago

Does this phenomenon replicate itself in the start-up world? Curious how many first time start-ups fail due to too much cash, to fast with no idea how to spend it appropriately.

60% of all NBA players end up poor

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