The stereotype is that many of these athletes go broke because they are foolhardy with money. I appreciate that this article highlighted that a lot of these guys go broke because of scamming financial advisors.

The athlete attempts to do the responsible thing and hires someone they are led to trust with managing their assets only to be ripped off. I'm not sure how financial literacy prevents this from happening when you literally may be lied to about where your money is.

At the end of the day, it's the same reason most people go broke: they know nothing about money. Unfortunately, Money is the most important thing in the world because you can't get anything without it. And yet, it's not even a primary subject taught in k-12. Where are people supposed to go for a decent financial education? Instead k-12 teaches kids about useless butterflies and countless other things that are of lesser importance. You would think, they'd at least teach it in college. But, I know MBA graduates with 3.8 GPA who don't even know what a tax deduction is!

I recommend basic financial classes for everyone k-12, everyone should have the right to basic understanding of personal finances and basic economics.

TLDR; 60-70% of players go bankrupt or are under financial stress after they retire. Reasons are (1) they don't follow balanced mix of investments and squander money in opportunities presented by smooth talkers (2) they end up hiring people who are friends of other players as opposed to actual professionals to manage their assets (3) divorce.

The recommended mix of investments for 20+ million assets is apparently "5%to private equity, 7%-12% to real estate, 50%-65% to a mix of public securities(stocks, mutual funds and the like) and the rest to alternatives such as gold and hedge funds.".

Let us not forget that even in 2018, your Financial Advisor (loosely defined) may not be obligated to act in your best interest [0]. The Financial Services industry has been fighting hard for the gravy train to continue unabated for years. Fortunately for them, Trump has been very receptive to their plight and doesn't want the party to end just yet.[1]

[0]http://time.com/money/4809060/fiduciary-rule-financial-advis...

[1]https://www.dol.gov/newsroom/releases/ebsa/ebsa20171127-0

In many situations, people who are identified as being at risk have somebody else placed in control of the finance, by court action. Brain injury patients for instance. Hmmm.. hang on.. whats the major risk factor in the football circuit again?

Seriously: the recruitment of minors for major league with giant cash benefits should require them to sign a consent form for arms-length management of their capital for some time period, and give them the income stream not the capital.

after all, its often how the money is being controlled that wound up being their notional capital in the first place

ESPN's "30 on 30" sports docs looked into this matter and did a really goof job and worth watching. The episode is called "2 Broke". https://www.youtube.com/watch?v=Elfw0ESih-A

Pretty much the plot of the HBO series "Ballers". It's not the most intellectual show, but it does tie together the fallacy of "Balling", essentially how trying to maintain an outward perspective of wealth and excess usually leads to a quick demise of said wealth...

I don't know all the tax implications around huge salaries like these, but every time I read one of these stories I always wonder why they don't just stick their money in t-bills or CDs. Something completely risk free that will get a modest return. If you have 20 million in the bank do you really need to invest in high risk stuff to try to double your money?

The problem is everyone they've ever known comes out of the woodwork and is hitting them up for money or pitching some great investment. That's the hard part. Saying "no" to these people.

This sounds a lot like how most people go broke. Even when you are talking about people who have been fortunate enough to make a lot of money (like lotto winners), the story sounds the similar.

Maybe we need better financial education in the public school system?

30 for 30 did an episode on this. It was so interesting and while true many get scammed out of their money, a lot more are spending it check to check.

Quotes from the show "I had more mortgages than HUD" "I had 30 to 40 cell phone contracts" "No athlete wants to earn a few percentage points in bonds. They wanna go for the big dollars, Open restaurants, clubs and car washes! They conquered sports now they will own their next endeavor"

Worst stat from the show: 60% of athletes are broke within 5 years and 70% are divorced within 3 years.

Shocking stat: There is (was?) a website that tracks athletes as they go from town to town so women can go hook up with them.

Many of these quotes are from the big money makers in various sports (NBA, NFL, MLB). They also interview the ones that were able to maintain their money. Like Jamal Mashburn who told his mom that he was going to set her up with a new house and car and before he could finish she told him to save it and take care of himself first.

I’ll assume for this conversation we are referring to black and latino athletes in the US. In that case, a lot of it comes down to family. A $10 million contract is a life changing windfall for a single unnattached person with no extended family to support, or whose extended family already is self sufficient (as a much greater proportion of white people in the US naturally are). But when you are the first person in your entire family tree to have above a 5 digit net worth, you immediately become liable for everyone, and it can quickly go to squat. Its called the “brown tax”. Escaping poverty can be almost impossible for an individual when they are weighed down by these obligations. It doesnt matter how financially literate you are when your aunt is being evicted from her apartment or your cousin needs bailed out of jail.

A couple of things:

I can't manage to copy and paste it from the article, but one section talks about these guys hiring friends and family, not for their expertise, but as a favor. This inevitably goes bad places.

The old boys club is about knowing you well enough to vet you on two things: 1. How trustworthy you are generally and 2. What you are good at.

Having connections matters and if you can't establish those connections, you will go nowhere fast. But when it is at all healthy, establishing those connections is about vetting you. These athletes never got the memo. They haven't learned that the reason you hire someone you know is because you can literally trust them with your life, not because they need charity. If they need charity, give them charity. Don't entrust your millions with them.

Second, I really appreciate the section where they talk about divorce and that it often happens after retirement in part because these guys can no longer avoid the hard conversations. A lot of marriages seem to only work in X circumstances and to fall apart if circumstances drastically change. The two people are compatible as cogs in X machine, but the personal relationship isn't really that strong. They don't adapt well when that situation goes away.

tl;dr of the article:

Athletes have high earnings for short periods of time, but often prefer risky "flashy" investments (e.g. nightclubs) and aren't typically knowledgable regarding anything having to do with basic finance.

Its easy to invest a lot of money in a good way when you have no ego and all the time in the world to learn about investing. Professional athletes almost never fit that bill.

Everybody is being too nice. Athletics is hard, and is an almost full-time job for professional aspirations from 15 years old on.

Many of these athletes are semi-literate. And this has been going on in boxing, for time immemorial, for the same reason.

A means has to be found to better attack the perpetrators.

There was a podcast by Freakonomics where they tried to educate ex-NFL players about finance and economics. It seems one of the most important differences from the average person is that NFL players earn almost all their life's earnings in the first quarter of their lifetime

A mitigating factor is professional sports offer amazing retirement benefits.

https://www.bankrate.com/retirement/retirement-benefits-of-p...

Olympic athletes are known to sell some of their team clothes after the games. I overheard a well-to-do family at Mammoth saying they bought the jackets off some US Olympic ski team members who were broke.

So many of these athletes feel that they are role models and civic leaders, yet they can't so much as balance a budget. Our culture glorifies these guys so much when they are much more like lottery winners than anything else. It doesn't take intelligence to be 6-8 and jump out of a gym.

This article is from 2009.

It works like this:

1) Increase your income

2) Increase your expenses

3) Lower your income, keep your expenses the same

Let me guess, getting your entire career salary in a lump sum before you're 30 and having the impulsive personality of an athlete doesn't mix well?

Finding it pretty hard to muster up any kind of empathy for millionaire professional athletes.