Why Do So Many Former NBA Players Go Broke?
Antoine Walker was one of the most famous stars in the NBA, so it should come as no surprise to learn that his stardom came with corresponding compensation. In total, he earned more than $100 million throughout the course of his NBA career, but had to file for Chapter 7 bankruptcy in 2010. (1) For reference, this means that Walker had become bankrupt within 2 years of his retirement, seeing as how that had happened in 2008.
With that said, Walker had become bankrupt for the same reason that most people become bankrupt, which is to say, his expenses exceeded his revenues so much that he lacked the time needed to make the necessary changes to his portfolio in order to keep himself afloat. In his particular case, he claims that it was the Great Recession that did him in by sinking his Chicago-based real estate firm, which had a lot of undeveloped properties with associated mortgages that came due, thus resulting in the banks collecting his financial portfolio that had been put up for use as collateral.
Unfortunately, Walker is far from being alone when it comes to either former NBA players or other former professional athletes, which is why he now spends much of his time talking to the younger generation about his story so that they can avoid making the same mistakes.
Why Do So Many Former NBA Players Go Broke?
According to Sports Illustrated, an astonishing 60 percent of former NBA players become bankrupt within 5 years of their retirement, which is actually not particularly unusual among former professional athletes. Here are some of the most common reasons behind this problem:
Lifestyle
Professional athletes tend to have expensive lifestyles. In Walker's case, he was spending vast sums of money on fast cars, expensive jewelry, and nice homes, which is not particularly unusual among people who have suddenly come into a great deal of wealth. Furthermore, it is interesting to note that Walker was also spending vast sums of money on other people by helping them move into new homes as well as providing assistance with all sorts of matter, which once again, is not particularly unusual among people who have suddenly come into a great deal of wealth.
Unfortunately, the sheer amount of professional athletes' consumption means that unless they can continue earning money at the same rates, they are doomed to run out without making some serious changes to their lifestyles. This is particularly problematic for them because they tend to have much shorter earning periods than other celebrities unless they can make a successful transition to some other field such as music and film, which is rather unsurprisingly, extremely rare.
Reliance on investment "professionals"
Naturally, most professional athletes are smart enough to put their money in investments, which are meant to earn them sufficient income over the course of their retirement to maintain them in the manner to which they have become accustomed. Unfortunately, earning enough from investments to do that is much easier said than done for the simple reason that investments with higher rates of return also come with higher levels of risk.
Since most professional athletes lack the specialized expertise and experience that they need to make the right investments, this makes them completely and utterly reliant on those who they choose to take care of their financial interests, particularly because most professional athletes are also uninterested in picking up that expertise and experience as they go along. In this manner, they are not particularly different from most consumers when it comes to investments, but it hits them that much harder because of their need for high revenues due to their high expenses.
The Entourage
Finally, it is important to note that professional athletes are popular targets for malicious individuals seeking to enrich themselves at the expense of others. In part, this is because professional athletes are so reliant on those that they have chosen to take care of their financial interests, meaning that there is a great deal that said individuals can do to abuse the trust that has been placed in them.
However, it should also be noted that professional athletes' lack of understanding about business, generosity when it comes to the handing out of their money, and their continuing need for high revenues after retirement make them particularly susceptible to scamsters, who often succeed by making extravagant promises about the rates of return that they could be earning, which cause interested individuals to let down their guards with often disastrous consequences.
Further Considerations
With that said, it is important to note that former NBA players and other former professional athletes are not necessarily doomed to bankruptcy within a few short years of their retirements. After all, some of them have managed to make extremely successful transitions to business careers, as shown by Shaquille O'Neal, who owns a wide range of businesses making handsome returns because of the time and effort that he has poured into making the right investments with his money.
Although chances are good that most former professional athletes cannot achieve the same success as Shaq, chances are also good that they can keep themselves going so long as they are willing to put in the same time and effort that other people do when it comes to their finances.
Generally speaking, these are rather simple steps. First, people who are interested in investments should always make sure to choose the right people to represent them, which means looking at their credentials as well as their performances by speaking with their other clients in both the past and the present. Second, people who are interested in investments should always keep a close eye on their portfolios to make sure that what is happening matches what they have been promised, which is something that extends to their representatives, since formerly skilled and reliable people can violate their codes of ethics for the sake of their personal profit.
Finally, people who are interested in investments should always strike a balance between high rates of return and stability of income, thus ensuring that they won't lose too much because of unexpected contingencies while also enabling them to benefit from the positive trend of the market in the long run. Summed up, people should always trust but verify if they want to succeed in investing.
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Written by Garrett Parker
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