7 ms·

60% of all NBA players end up poor

61 points by hezekiah 15y ago

dlikhten 15y 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 15y 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 15y ago
    I have seen this literally - it's low down but it does happen.
- peterb 15y ago
  It doesn't just happen to athletes. I saw the same thing happen in the high tech world during the dot-com bubble.
vannevar 15y 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 15y 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.
- deleted 15y ago
  [deleted]
  - sp_ 15y ago
    I don't know about an NBA player that did that but Brazilian football player Marcelinho did that while playing in Germany. Despite having a seven-figures salary he was broke all the time and had to ask his club for loans because he financed the lives of literally dozens of his friends and family members.
jgmmo 15y 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 http://www.cfp-board.org/bulletin.html more studies on lottery winners: http://answers.google.com/answers/main?cmd=threadview&id=141224 http://answers.google.com/answers/main?cmd=threadview&id...
jfruh 15y 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 15y 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 15y 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.
    - prawn 15y ago
      Can only speak for basketball (my brother plays in our NBL and I run hoops.com.au) but I'd say you're correct. Some go in to coaching or admin roles, but not many and, at least in Australia, many of those positions are not particularly well paid.
- aklein 15y 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 15y ago
    But it's far more investment efficient!
jhamburger 15y 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.
phamilton 15y 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.
AlexMuir 15y ago
http://retardzone.com/2008/09/23/abandoned-mike-tyson-mansion-in-ohio/ http://retardzone.com/2008/09/23/abandoned-mike-tyson-mansio... For an idea of where the money goes.
- antidaily 15y ago
  One can only imagine the amount of fornicating that went on in that pool room.
jedberg 15y 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 15y ago
  They they wouldn't be ballers. Just people with a job. But seriously, they should have some kind of program.
  - jedberg 15y ago
    A job with an amazing severance.
- roldon332 15y 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.
- prawn 15y 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.
- 15y ago
protomyth 15y ago
nice article on the MLB pension plan with mentions of various other leagues: http://www.businessinsider.com/nfl-nhl-nba-mlb-retirement-pension-plans-lockout-2011-1 http://www.businessinsider.com/nfl-nhl-nba-mlb-retirement-pe... [add link] http://www.thestreet.com/story/10983698/1/even-pro-athletes-worry-about-retirement.html http://www.thestreet.com/story/10983698/1/even-pro-athletes-...
rickdale 15y 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 15y 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 15y 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.
Rariel 15y 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 15y 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 15y ago
you can give a poor person money but you can't make them wealthy.
WettowelReactor 15y 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.
losethos 15y ago
10 The stupid man sows discord by his insolence, but with those who take counsel is wisdom. 11 Wealth quickly gotten dwindles away, but amassed little by little, it grows. 12 Hope deferred makes the heart sick, but a wish fulfilled is a tree of life.

61 points by hezekiah 15y 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 15y 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 15y ago
  I have seen this literally - it's low down but it does happen.
peterb 15y ago
It doesn't just happen to athletes. I saw the same thing happen in the high tech world during the dot-com bubble.

vannevar 15y 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 15y 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.

deleted 15y ago
[deleted]
- sp_ 15y ago
  I don't know about an NBA player that did that but Brazilian football player Marcelinho did that while playing in Germany. Despite having a seven-figures salary he was broke all the time and had to ask his club for loans because he financed the lives of literally dozens of his friends and family members.

jgmmo 15y 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 http://www.cfp-board.org/bulletin.html more studies on lottery winners: http://answers.google.com/answers/main?cmd=threadview&id=141224 http://answers.google.com/answers/main?cmd=threadview&id...

jfruh 15y 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 15y 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 15y 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.
  - prawn 15y ago
    Can only speak for basketball (my brother plays in our NBL and I run hoops.com.au) but I'd say you're correct. Some go in to coaching or admin roles, but not many and, at least in Australia, many of those positions are not particularly well paid.
aklein 15y 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 15y ago
  But it's far more investment efficient!

jhamburger 15y 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.

phamilton 15y 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.

AlexMuir 15y ago

http://retardzone.com/2008/09/23/abandoned-mike-tyson-mansion-in-ohio/ http://retardzone.com/2008/09/23/abandoned-mike-tyson-mansio... For an idea of where the money goes.

antidaily 15y ago
One can only imagine the amount of fornicating that went on in that pool room.

jedberg 15y 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 15y ago
They they wouldn't be ballers. Just people with a job. But seriously, they should have some kind of program.
- jedberg 15y ago
  A job with an amazing severance.
roldon332 15y 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.
prawn 15y 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.
15y ago

protomyth 15y ago

nice article on the MLB pension plan with mentions of various other leagues: http://www.businessinsider.com/nfl-nhl-nba-mlb-retirement-pension-plans-lockout-2011-1 http://www.businessinsider.com/nfl-nhl-nba-mlb-retirement-pe... [add link] http://www.thestreet.com/story/10983698/1/even-pro-athletes-worry-about-retirement.html http://www.thestreet.com/story/10983698/1/even-pro-athletes-...

rickdale 15y 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 15y 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 15y 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.

Rariel 15y 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 15y 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 15y ago

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

WettowelReactor 15y 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.

losethos 15y ago

10 The stupid man sows discord by his insolence, but with those who take counsel is wisdom. 11 Wealth quickly gotten dwindles away, but amassed little by little, it grows. 12 Hope deferred makes the heart sick, but a wish fulfilled is a tree of life.