The $5 Million Problem

In light of ESPN's presentation of its new 30 for 30 documentary "Broke", which describes athlete's financial troubles during and after their playing careers, I decided to do my own research into how big of a problem financial irresponsibility of many athletes (for those who do not know about 30 for 30, more information can be found here).  As many people already know, athletes will succumb to lavish spending for their houses, cars, and clothes, even after only their first paycheck, because it is the first time in their lives that they have had anywhere close to that kind of money, and it is hard for them to resist spending a large chunk of that money.  However, what people do not realize is that, especially for NFL players, these players receive pay checks after games and nothing during the off-season.  So if a lot of the money they received is spent during the season, and not much money is left for the off-season, they can end up in serious financial trouble.  This is why money former players file for bankruptcy, even if they earned massive contracts and enjoyed long careers.  The Huffington Post lists 10 reasons why NFL players end up going bankrupt.  

Because of this problem, many players have turned to money management companies to help them better manage their finances.  These companies have noticed that free-spending athletes will spend around $2 to $3 million a year, which, if they only receive one contract (as the average pro career of NFL players is 3.3 years, which would be covered by the first contract), can financially cripple these players.  The players who choose to hire these companies to help them with their spending end up spending around $550,000 per year, which is certainly comfortable, while saving a large chunk of their money for the future.  This helps these athletes enjoy comfortable living well after their playing careers are over.      


I think that the reason this happens is because these athletes are so proud of themselves and happy that they think they are "set for life" with money. This happens a lot too with the lottery. You hear stories all the time, some "blue collar" worker wins a few million dollars, quits their job, and then has to beg for their job back in a few short months because they just spent it all very quickly. This article talks about ways to spend your lottery winnings. Although this article is talking about the lottery, it is proving the same thing, that once people make a lot of money they don't know how to spend it properly.

This makes so much sense because when people who don't usually have money get a large amount of money, they just go out and spend it all in one sitting. This is where the saying,"Don't spend all your money in one place!"/a> comes from. I believe this theory can also be applied to bankrupt lottery winners. I do think it is some what of a cycle when the athletes spend all their money because they spend their money and help the economy, but then they also spend their money for a money manager which also helps the economy. Either way athletes keep the economy flowing, at least in their own niche. I think it is amazing how much less athletes spend when working with a money management company compared to how much they spend on their own. At the same time they will end up spending the money in the future because they are saving so they can have the same lifestyle for years to come. SOmething I find very interesting is that there is actually a bankrupt millionaire club. I just can not imagine why someone would want to be in this organization. May be it helps ex-millionaires get through their tough times. Either way it is a funny concept and I think it may be better that the athletes are spending their money slower because they help the economy longer.

There has to be some kind of psychological change when somebody suddenly starts making more money than they ever thought they would. It seems that a lot of athletes make little to no money before they make it big into the NFL, NBA, MLB (etc). I'm sure there is a psychological change with anyone who suddenly is making a much significant larger sum of money, but I think it is especially elevated in athletes because there is a luxurious culture that comes along with me. They feel like they need to be spending money on expensive things, and I'm sure there are people who feel that they can make money off of their newly successful friend or family member, and so that probably effects it as well.

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