Blogs and news channels are awash with stories of successful athletes who lost it all in the blink of an eye. Some of these financially struggling athletes end up filing for bankruptcy or spiraling down the social ladder. So how does it happen, how do rich athletes go from millionaires to bankruptcy?
Poor Financial Management
In most cases, athletes are not what you’d call finance savvies. Many of them are overwhelmed by the sheer amount of money, and in the excitement, fail to put it into good use. Most athletes never make any meaningful financial investments even with a high surplus of cash. This is what some individuals and organizations are hoping to address through offering financial planning for professional athletes to help them make wise wealth management decisions that secure their financial future.
Professional athletes are some of the wealthiest people in the world; many have adopted what can only be described as extravagant lifestyles. It’s often common to find athletes spending ridiculous amounts of money on things like fashion, parties, vehicles, houses, and jewelry. Overspending on meaningless luxuries and expenses burns through money fast. Wealthy athletes who choose a modest lifestyle mostly end up stretching their fortunes over to the next generation.
Small Earning Window
The sports industry is extremely competitive. Unlike other job occupations, athletes often retire early and have a tiny window to cash out. For instance, the average age of a pro soccer player is between 16 and 43 years, this may seem like a long time, but athletes usual peak once within a period of three or four seasons. With such a narrow window of success, the money comes and goes very quickly. Some athletes are caught unprepared for the sharp drop in income following the end of their careers.
Athletes could learn a lot from investors and financial advisors. They need to learn that getting a grip on finances means practicing a certain level of discipline when spending and preparing for the future.