simplicity

Ran across the “Recession or no recession, many NFL, NBA and Major League article” article on SI.com courtesy of an article on stretchdollar.com. I’m not surprised that even though these athletes are making millions of dollars that they are losing a good portion of their money. What does surprise me though is how many of these athletes it’s happening to. I guess when you start making that much money the fear of losing it all is the furthest thing on your mind. Some of the great notes from the article

� By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.

� Within five years of retirement, an estimated 60% of former NBA players are broke.

Wow, seventy-eight and sixty percent respectively. Read that again so it soaks in. I want them to break it down by divorce, child support payments, etc… That would help to make sense of this, cause I can see that becoming a major cause of the money hemmoraging.

� Numerous retired MLB players have been similarly ruined, and the current economic crisis is taking a toll on some active players as well. Last month 10 current and former big leaguers-including outfielders Johnny Damon of the Yankees and Jacoby Ellsbury of the Red Sox and pitchers Mike Pelfrey of the Mets and Scott Eyre of the Phillies-discovered that at least some of their money is tied up in the $8 billion fraud allegedly perpetrated by Texas financier Robert Allen Stanford. Pelfrey told the New York Post that 99% of his fortune is frozen; Eyre admitted last month that he was broke, and the team quickly agreed to advance a portion of his $2 million salary.

Say it ain’t so Jacob, say it so!

The following seems to make sense, obviously there is a different level of intelligence and workload -

“There’s a far shorter peak earnings period [in sports] than in any other profession, and in many cases they lack the time and desire to understand and monitor their investments.”

[...]

“Chronic overallocation into real estate and bad private equity is the Number 1 problem [for athletes] in terms of a financial meltdown,” Butowsky says. “And I’ve never seen more people come to me about raising money for those kinds of deals than athletes.”

And now we get further explanation. It’s all making sense!

SALARY ASIDE, the closest analogue to a pro athlete is not a white-collar executive. It’s a lottery winner-who’s often in his early twenties. “With athletes, there’s an extraordinary metamorphosis of financial challenge,” says agent Leigh Steinberg, who has represented the NFL’s No. 1 pick a record eight times. “Coming off college scholarships, they probably haven’t even learned the basics of budgeting or keeping receipts.” Which then triggers two fatal mistakes: hiring the wrong people as advisers, and trusting them far too much.

One of the best items from the article though is the amount of money associated to Shaq’s spending

Perhaps the upper limit on spending was set by the famously profligate Shaquille O’Neal, who-according to a document obtained by the Palm Beach Post during O’Neal’s canceled divorce filing in January 2008-spends a total of $875,015 each month, including $26,500 for child care, $24,300 for gas and $17,220 for clothing. But O’Neal, who also has been known to fund charities anonymously and cover medical bills for complete strangers, has the wherewithal to remain solvent.

Wow, impressive. That’s insane. I can’t wrap my head around the amount of money they earn, let alone spend to become bankrupt. I don’t have the mental capacity to understand the amount. But generally, I think they fall into the same category as a good portion of the public, a lot of people in general just don’t try to understand their finances and how to effectively prepare for retirement.