Recently a primetime special, “Back in the Game” aired on CNBC. Hosted by Alex Rodriquez, the former baseball player, the show focused on retired pro athlete Joe Smith, who although earning over 6o million dollars over his playing career has little to show for it. To most people, it seems unimaginable for anyone to end up this way, but a large majority of those who think so would end up in the same place if given the same opportunity.
We’re all familiar with this story. We’ve seen pro athletes make enormous amounts of money only to go broke shortly after they retire. Most people take a critical view of these people because they can’t imagine being so financially irresponsible.
It’s easier to judge others for their poor choices than it is to admit to our own. The truth is, most people make the same choices in managing their money as Joe Smith made in managing his, which means their results will be similar.
There are reasons pro athletes end up financially destitute and they’re the same reasons why other people end up in similar situations.
4 reasons pro athletes and also ordinary people end up broke
It makes no difference how much money you make. A lack of financial discipline will always lead to financial hardship. When you spend more money than you make, even if it’s just a few hundred dollars here and there, you’re spending money you haven’t yet made, you’re spending tomorrow’s money today. Unfortunately, that overspending means you’re borrowing from the future at a cost.
Buying too much house, too much car, too much anything, decreases your ability to create margin (the difference between what you make and what you spend). When more is going out than coming in, it’s impossible for you to save or invest for the future. The number one way you can eliminate overspending is by living on a written budget and tracking every expense, to ensure overspending doesn’t happen.
2. Unaware of the passing of time
In the prime of their playing career, a pro athlete thinks he’s invincible. Unaware of the passing of time, he believes tomorrow will always be better both in a physical and financial sense. We’re no different. We believe we’ll make more money in the future and that we have many years ahead of us to “catch up.”
Unfortunately, the statistics show that most people entering retirement are ill prepared. And yet, those who are still a ways off from retiring haven’t done much to change their behavior in order to be better prepared. They don’t save enough and still spend most of what they make.
3. No financial knowledge
Most pro athletes start their career in their late teens or early twenties. They’re young and inexperienced in many things, especially in financial matters. Many pro athletes have gone broke in part because they invested in things they didn’t understand.
A basic financial education that includes understanding debt, savings, and budgeting would have prepared them to make wise decisions and avoid financial disaster. Same goes for the rest of us.
Financial education is your responsibility. If you wish to succeed with money you have to learn how to manage it. The information is readily available, it’s not difficult, and you can easily begin to implement it TODAY.
Start with the basics. Understand how debt is hurting you and how to eliminate it. Create and operate your finances by a written plan - a budget. Save a minimum of 10% of your income and learn about investing to secure a better future for yourself and your family.
4. Bad influences
We’ve all seen some pro athletes on the news behaving in less than honorable ways. Some of the people they associate with almost guarantee they will end up in trouble. However, it’s not just those influences that are bad for them.
The people that lead pro athletes financially astray are often con artists who know just how to empty out their bank accounts by offering them opportunities to invest their money into foolish investment. Their lack of financial knowledge and their trust in these scrupulous individuals is their undoing.
You may never have one of these individuals offer you investment advice, but bad influence can come from many other sources. The pressure to spend beyond our means often comes from those closest to us.
Your friends or loved ones who are irresponsible with their own money will have a negative impact on you. You must guard yourselves against these negative influences if you’re going to have financial success.
It’s easy to see faults in other people’s behavior while being unaware of our own shortcomings. Rather than judging pro athletes and celebrities for their extravagant and carefree lifestyles, let’s look at the way we manage our money first because mismanagement of money will result in financial trouble, regardless of the amount of money involved.
Make a plan and take action today to ensure your money is well managed and your future looks bright. If you need help getting out of debt, building a working budget, or increasing your savings, check out my resource page. There you'll find the tools that will help you get started.