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4 Lessons From Professional Athletes That Went Broke

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Personal Finance

August 31, 2018

Professional athletes are notorious for overspending and making bad financial decisions. Usually, they acquire millions of dollars overnight which is a gift and a curse for their financial futures. It’s the same reason why so many people who win the lottery end up going broke.

They simply aren’t prepared. Just ask people like Mike Tyson, Allen Iverson or John Daly. Ironically, the reason so many athletes go broke, despite making millions, are the same issues most people struggle with just on a smaller scale.

Here are four financial lessons to help you avoid the mistakes top athletes make.‍

1. Living Beyond Your Means

What Athletes Do

‍They buy any and everything they want, often times living well beyond their means until it’s too late to course correct. This usually includes buying huge mansions, yachts, expensive cars and other luxury goods.

‍What You Do

‍Most people spend the same way as athletes just on a smaller scale. Credit cards make it way too easy to buy things without having the money to pay it off instantly. If you can’t buy something with a credit card and pay it off in full each month, don’t buy it. Most credit card interest rates will be between 10-20% making your purchase much more than anticipated.

Pay your card off in full every month. Credit card debt is one of the worst types of debt to carry. Try and avoid it like the plague!

‍2. Not Planning Ahead

What Athletes Do

‍Professional athletes spend money like they are going to earn that salary forever, instead of setting up college funds for their kids, investing or simply putting money in a savings account for the future.

‍What You Do

‍Planning is crucial in securing a financial future for yourself and your family. No matter what age you are, the sooner you start planning, the better off you’ll be in the future.

Here are three ways to start planning your financial future:

Start an emergency fund with at least six months cash in a savings account.
Contribute towards retirement with a 401k or Roth IRA (or both if eligible).
Save up for big events such as a home, car or wedding in a high-interest savings account.

3. Keeping Up With Your Peers

What Athletes Do

‍Athletes, in general, like to be flashy and spend large amounts of money on cars, jewelry, and other items to keep up with their fellow players.

‍What You Do

‍Society does this too by “keeping up with the Joneses.”

Here’s how you can avoid it:

Stop Caring: Do you think you’ll be happier if you buy a new car because of your coworker, friend or neighbor did? Or, do you think you’ll be stressed out thinking about the high-interest payment? Stop caring about others and focus on your own financial goals.
Save Your Raises: If you get a raise or bonus, don’t increase your lifestyle to match as it just negates the increase in pay. Instead, treat yourself to something you’ve been wanting to buy and save or invest the remaining amount.

4. Trusting the Wrong People

What Athletes Do

‍Often times, athletes fall prey to shady individuals with Ponzi Schemes, questionable business ideas and bad real estate deals.

‍What You Do

‍It’s not always easy to know who to trust in the financial service industry either. Click here to learn more about working with a financial advisor, and be sure to do your due diligence when selecting a financial advisor to work with.

‍Would you like to learn how to achieve your best financial future? Simply request a call from a Bayntree financial advisor today.

‍Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.

Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.

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