The rate at which professional football and basketball players are filing for bankruptcy after retirement is being discussed with increasing frequency across the NFL and NBA. The issue is not confined to those to sports alone, though, as some of the biggest athletes in a variety of sports – Warren Sapp, Dennis Rodman, Mike Tyson, Marion Jones – are broke. Sports Illustrated estimated in 2009 that 78% of NFL players become bankrupt or face serious financial stress within two years of ending their playing careers and that 60% of NBA players become broke within five years of retiring.
The causes of these financial problems are not as obvious as one might think. Outrageous spending is, of course, partly to blame. For example, Antoine Walker earned over $100 million during his career, but began bouncing checks in 2009. Walker purchased multiple luxury customized cars, ordered closets full of custom-tailored suits and expensive watches, and took constant trips to Las Vegas where, he estimates, he spent $50,000 per weekend.
Poor investment advice also plays a role; Johnny Unitas invested in numerous failed business ventures, including a chain of bowling establishments, a prime-rib restaurant, an air-freight company, and Florida real estate investment. Unitas filed for personal bankruptcy protection in 1991 after investing in a failed circuit-board manufacturer and died 11 years later with a lawsuit from his estate hanging over all of his businesses.
Child support also drains some athletes’ savings. Take running back Travis Henry, who fathered 9 children with 9 different women. He now owes an estimated $170,000 per year in child support, and was jailed for falling $16,600 behind on support for a youngster in Frostproof, Florida.
Generally, low financial literacy makes many athletes and non-athletes alike vulnerable to suffering losses in investments. Many Americans spend everything they earn, whether that’s $50,000 a year or a $10 million signing bonus. The lessons many of these athletes have learned can be applied to those of us not gifted with athletic prowess as well. If you are looking to increase your savings and ensure you stay away from bankruptcy, it is important to understand how financial advisers are supposed to collaborate with clients, know what returns to expect on certain types of investments, and appreciate the value of setting a budget.
If you are in deep financial trouble, or have questions on how to avoid bankruptcy before it occurs, contact a bankruptcy attorney in of our offices for advice. Newland & Newland attorneys are located in Arlington Heights, Libertyville, Crystal Lake, Chicago, Waukegan and Itasca, Ill. and are ready to help you. See related blog posts.