Once upon a time, Americans were fascinated by the “rags to riches” stories of people who overcame great odds and challenges to rise to a high level of success. Though there are still stories like that today, they are fewer and fewer in number, especially in the area of professional sports.
The narrative has changed. Stories of many professional athletes go from rags to riches to rags, such as the case of former NBA star and Philadelphia 76er Allen Iverson. While many people make the case that someone who has $1 million hardly can be considered to have returned to rags, Iverson’s story has a lot of incomplete or missing information. And there is an interesting twist in all of his financial globetrotting that leaves you wondering if he can indeed avoid a ragtime ending.
In simple numbers, Iverson had made more than $150 million as an NBA player. If he has only $1 million in net worth remaining – remember we are talking about net worth, not just cash – then he has managed to spend $153 million on people or things that he no longer can count as his own. During his playing years he had a number of endorsement deals, adding to his coffers. One irony was that during his playing days he was known as “The Answer” but now that his playing days are over he doesn’t seem to have an answer to his financial difficulties.
Most wealthy people agree that in order to achieve and keep your hard earned wealth you need to have a fair amount of discipline. Iverson’s life has a long history of being anything but when it came to his personal life and career. He served four months in prison even before entering college, and that behavior would manifest itself during his basketball career. The undisciplined Iverson would miss practices, get into confrontations with coaches, and refused to train as required for team discipline and unity.
His choices of friends are also questionable, including his personal bodyguards. He had been found guilty of illegally carrying a concealed weapon in 1997, and bodyguard Jason Kane had assaulted Marvin Godfrey which resulted in a torn rotator cuff, concussion, eye damage, and ruptured eardrum. That fiasco cost Iverson $260,000. He would take that attitude into casinos in Atlantic City and Detroit, where he would find himself banned for either financial or behavioral indiscretions.
These person insights are relevant to his total net worth because they point to how easy it is to lose most of your money no matter how much you may make during your career. Iverson’s estimated income for the entirety of his playing career is at $200 million. The statistics show that more than 60% of professional sports players will be broke within 5 years after retiring from their sport.
The twist to his financial position is that he has an agreement with Reebok signed in 2012 that will pay him $800,000 per year, with a final payment of $32 million once he reaches 55 – which will be in 2030. That final payment is still 11 years away, and he is living as if he already has the money in hand. But the court system does not see it that way, which translates to being in court constantly. The seldom talked about reality of the $32 million final payment is that Reebok did not trust Iverson to properly manage the money, so it was placed in a trust for him.
For example, only 6 years ago a judge seized Iverson’s bank account to pay off his existing debts. Child support payments to his ex-wife with their 5 children aboard gouge out a significant part of that $1 million annual salary from Reebok. Yet he still lives a lifestyle filled with lavish expenses and with an utter disregard for any financial planning.
The question to be answered here is how does Iverson manage to have his net worth assessed at $1 million when it appears he has a negative cash flow every year? The reductionist answer is that the estimators are always looking a year ahead when he is due his next $1 million from Reebok. Perhaps the hope is that he will come to his senses before 2030.
Until then, he is likely to continue paying his traveling hair dresser, buying expensive cars (though that possibility has been somewhat restricted since his financial issues have become common knowledge), and generally spending money like there is no tomorrow. He does have $1.4 million sitting in an NBA pension fund that will be available to him beginning in 2021, but even that is still more than two years away.
Playing the role of the contrarian, maybe Allen Iverson is smarter than anyone thinks. He defends himself against the critics by saying he is not actually broke – and to that point he is correct. It is whether you look at him at any given point of time in the present, or whether you look forward to 20121 or 2030. Few people have $32 million waiting for them when they turn 55, and at that point his children will be grown and gone (no child support to worry about). The only person he will have to worry about is him.
Of recent vintage, he has avoided any legal entanglements so he keeps the money he used to have to pay for lawyers. He has returned to basketball as an owner of a Big 3 team, which apparently is kind of an investment and has helped to return him to the sport he once loved, an interest that also seems to keep him from getting into any general types of trouble. Guessing at what his future net worth will be is interesting to say the least, almost worthy of getting a Vegas line on the outcome. But still, 2030 is a long way off.