For most people, the earnings of professional athletes at the top of the game in the most popular sports are ridiculous and without meaning. And that is if you break them down into monthly or even weekly sums. Cristiano Ronaldo, the best-paid footballer in the world in 2016, made $82 cool million last year. That’s just shy of $7 million per month, $1,6 million per week, $225,000 per day. Or, put another way, that is $2.6 every single second of every hour of every day, the entire year.
Of course, these kind of numbers are outliers, and not the norm, even at the highest levels. Still, according to The Independent, the average salary for the around 400 players plying their trade at the highest domestic level of English football, The Premier League, was around £30,000 per week back in 2013. That equals about £1.5 million annually, which is around $2.0 million, and the numbers are likely to have increased significantly since those days. The 2016-17 average salary in the NBA is $4.6 million, while the average MLB salary is estimated to be $4.3 million. NFL players, on the other hand, only earn on average $1.9 million yearly.
Or, put another way, professional athletes at the highest level tend to make more money than ordinary people do in a decade, or even a lifetime. However, the truth is that these same athletes go broke shortly after retiring. 60% of Premier League footballers declare bankruptcy within five years of retiring, with the same estimate circling for NBA players and even worse numbers for NFL players. How is it possible to go bust so quickly after earning these kinds of figures, and what can we learn from their mistakes? Let us take a look at some mistakes our high-earning heroes would do well to avoid, in order to stay clear of dark and troubled financial waters.
1. Don’t Try To Keep Up With The Kobes
Being a professional athlete at the highest level in the most competitive sports means there is a good chance of you being more competitive than the average person. Unfortunately, for many, this often translates to life off the court as well, where they will try to keep up with the appearances of those whose compensation is an order of magnitude higher. While Kobe Bryant, Cristiano Ronaldo and the other stars at the very top of their game can afford to buy a $50 million home and a $5 million car, the person that is pulling $5 million per year can’t. Leading luxurious lifestyles can drain the most well-funded bank account.
“Comparison is the thief of all joy” goes the saying, and this doesn’t just apply to athletes. Stop looking at your neighbour to determine where you should be spending your hard earned money. You can only achieve financial security by spending within your means, and getting there involves making a personal and informed decision about what matters in your life. And that’s before we even consider the fact that your neighbour is probably swimming in debt, barely staying afloat, to finance the big house, those brand new cars and all those nights out. Never let anyone else’s appearances be the basis for your financial decisions.
2. Don’t Abandon Control
Being an athlete at the highest level often means extreme focus and dedication to your trade. Some athletes take this focus one step too far, outsourcing every part of their financial life to others. It’s not uncommon to hear stories from athletes in their late twenties who have never paid a bill or even checked their account balance.
While a narrow-minded focus can be beneficial, you need to show some degree of involvement in your personal finances. If you believe this advice doesn’t apply to the regular guy or girl, think again. Far too many people are happy to let their spouse do the whole money thing, and stay completely out of it themselves. Your money is your future, your freedom and your safety, and while soliciting advice is OK, abandoning all control of your finances is not.
3. Don’t Take Advice From The Wrong People
The dumb jock is a typical stereotype applied to athletes, and their money management skills, or lack thereof, are often used to perpetuate it. A more nuanced story is that most athletes, especially in football (soccer), are brought into the game and start making money at an early stage. At this point, it is easy to rely on the advice of people who haven’t necessarily been properly vetted. Far too many athletes have ended up losing their money by taking malicious advice from people looking to enrich themselves, or people with good intentions dishing out poor advice.
Deciding on whose advice to act on and whose to ignore is among the most important decisions one will make with regards to their finances. While there are no guarantees, the first step to differentiating between good and bad advice is to educate yourself. The more you know, the more critical you can be when assessing potential advisors. References and introductions from real life persons that you know and trust are additional ways to tilt the odds in your favour.
4. Don’t Fail To Plan Ahead
Athletes’ careers are short, and in most sports, an athlete will reach the end of their career in their mid to late thirties. And that’s if they don’t suffer career-ending injuries, the yips or similar threats that can cut an athlete’s already short career. Failing to plan for what comes after is a surefire way to financial ruin because once the deposits stop landing in your account, the funds will be depleted before you know it. Even a healthy $2 million savings account will only last you four years if you’re spending $500,000 annually, which is not uncommon among the rich and famous.
If you think about it though, none of us has any guarantees. Your employer could go bankrupt tomorrow, and you’d be without a job and a regular income. Or you could be faced with unexpected medical expenses. In these situations, just like the athlete when his career ends, it is an awkward position to find yourself in unless you have planned ahead. But to build wealth is to create freedom for yourself, and by saving and investing in a way that puts your money to work, you will be far better equipped to handle life’s curveballs.
5. Don’t Be Stupid
It is the sad truth that in addition to poor spending habits, lack of knowledge, poor advice and planning, some people just tend to be stupid with money. That goes for athletes, but there are enough examples out there of ordinary people making extraordinary stupid money decisions. Advice under this headline is of the sort that everyone knows, but some just won’t heed because, well, they prefer to act stupid.
Don’t gamble and don’t spend money you don’t have (credit) to finance consumption. If someone offers you a quick and guaranteed return, grab your wallet and run, and generally just try to stay away from investments you don’t understand. If you only follow this advice, you are unlikely to slip further than you can comfortably recover from with a bit of grit and hustle.
And when you inevitably end up doing something stupid, because we all do, far more often than we will admit, do not let it define you. Pick up your tools, start working at correcting your mistakes and live life on your own terms.