We should all invest our time into becoming financially literate as soon as possible.
Especially those among us who generate millions of dollars early in life! Professional athletes are faced with a double-edged sword: they earn millions of dollars playing their sport, but they are young individuals trying to navigate with the same broken financial education we are provided. They do not have the opportunity to slowly grow their earning potential and learn how to manage it along the way.
For these reasons, professional athletes need financial literacy.
Photo by Jonathan Chng on Unsplash
Professional athletes accumulate wealth faster than they can learn how to manage it.
In the big-time sport leagues, such as the MLB, NFL and NBA, rookies between the age of 20-25 years old make anywhere from $2-10 million dollars per year. This is a crazy amount of money for anybody, but for a young person who has not had the time and experience in life to learn how to manage millions, it can disappear quickly. This is like winning the lottery wherein one-third of winners are bankrupt within 3-5 years. Except, it is worst,
“according to a Sports Illustrated article, 78% of NFL players and 60% of NBA players face serious financial hardships after retirement,” (source).
Because of this, it is important for professional athletes to become financially literate.
The best example of a star athlete that broke the cycle of financial habits common in the sports world, is Shaquille O’Neal.
The story goes that within 30 minutes of Shaq joining the NBA, he spent $1 million dollars! His banker called him and told him he would be broke if he kept going that way. From then on Shaq committed himself to learning about money and ended up completing an MBA! (He also completed his Doctorate of Education in 2012, Dr. Shaq!)
Shaq earned about $700 million during his NBA career and made the decision early on to save most of it,
“It’s not about how much you make, it’s about how much you keep,” Shaq says. “Save 75% of your earnings and put it away. Use the other 25% as you please,” (source).
By saving most of his income, Shaq has had a very lucrative retirement from the NBA. He used his NBA money to fuel his business empire and invested in steady and profitable businesses, including 172 restaurants, 150 car washes, 40 fitness centers, a shopping mall, a theater, and some nightclubs (source).
Shaq broke the mold of professional athletes and planned for his life after sports.
The mindset of a star athlete does not work in business.
The confidence needed to compete at the highest levels in sports makes for a very risky businessman. There are many examples of athletes who tried to apply their on-the-court confidence to their investments and lost millions, here are two:
• Dan Marino – NFL quarterback, lost $14 million from investing in Digital Domain (they made Tupac’s Hologram) • Curt Shilling – MLB Pitcher, lost $50 million when his videogame company went under (source
If professional athletes are mentored in financial literacy, they would be able to turn their millions into a stable and fruitful retirement.
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Sources: https://www.abi.org/feed-item/how-athletes-go-bankrupt-at-an-alarming-rate#:~:text=(16%25%20of%20retired%20NFL%20players,how%20athletes%20earn%20their%20money. https://www.cnbc.com/select/shaquille-oneal-money-saving-advice/ https://www.kevinmd.com/2018/05/personal-finance-lessons-from-shaquille-oneal.html