Game Changers of Wealth: Money Lessons We Can Learn From Professional Athletes
Professional athletes are in a unique situation of potentially earning massive wealth over a relatively short amount of time. Their careers are short-lived compared to other professions. How can they preserve their wealth so they can be financially secure for the rest of their lives? The answer lies in learning to be smart with money. The game-changers of wealth are those professional athletes who have learned that smart money changes everything.
Why Smart Money Changes Everything For Athletes
Throughout the history of sports, many professional athletes have faced financial challenges after their playing careers. The common causes of these financial challenges are issues such as addiction, poor investing, and living lifestyles over their financial means. Recently, there has been a shift where many athletes, who through financial literacy and smart money management, were able to set themselves and their families up for a successful financial future.
Professional athletes often run into financial trouble because they have high earning potential but in such a short timeframe. According to Statista, the average length of a player’s career in the NFL is around 3.3 years. In the NBA, that number is 4.5 years, according to The Sportster.
In the world of sports, athletes invest so much of their young lives developing their skills and talent in their chosen sport. Beyond their victories and defeats, one critical aspect of their long-term success that is often overlooked or completely neglected is how to effectively manage their finances.
Professional athletes have so many unique challenges and opportunities to secure their future financial security. Being smart about their money empowers athletes to:
Make better informed financial decisions to build their financial foundation early in their career
Provide a financial safety net around their finances from unscrupulous advisors and managers
Manage fluctuating income
Avoid financial pitfalls such as overspending, untrustworthy advisors, dubious investment proposals, and mismanagement of large sums of money
Protect against unexpected career-ending injuries and the medical expenses that come with long periods of rehabilitation
Build a sustainable retirement income and plan for a very long retirement, as the average professional athlete's career is relatively short compared with other professions
Financial Pitfalls of Some Professional Athletes
Professional athletes have the earnings potential to achieve financial success and stability for a lifetime. However, there are unfortunate instances where athletes find themselves facing financial challenges, leading to the loss of substantial wealth. Here are stories of a few athletes who experienced serious financial setbacks.
Mike Tyson, Boxer
Despite earning over $300 million during his boxing career, Mike Tyson faced many financial challenges that led him to bankruptcy in 2003. However, Tyson has focused on rebuilding his financial life in recent years. He has said he has learned from his past money mistakes. Tyson acknowledged his overspending, misguided trust in the wrong people handling his money, legal and criminal troubles, and lack of financial education, all contributed to his financial downfall.
Vince Young, NFL
Vince Young was a legendary quarterback at the University of Texas but then he struggled in the NFL. After a lifetime of ignoring his finances, he went bankrupt in 2011. He made many poor financial decisions, such as investing $600,000 in a famous actor’s restaurant without doing the research and being far too generous with his money. He even spent $15,000 for a single meal at a Cheesecake Factory. Fortunately, Young has recently stabilized his financial situation and took a job on the Longhorns coaching staff.
Lenny Dykstra, MLB
Lenny Dykstra, 1986 World Champion Outfielder for the New York Mets, was one of the gutsiest ballplayers of the 80s and 90s. His issues began with alcohol and drug addictions during his playing days. Following his retirement, Dykstra succeeded initially in the business world with a car wash empire he built that allowed him to live a lavish lifestyle. However, this success was short-lived, as Dykstra, started a financial magazine geared towards his fellow athletes. Because he didn't know much about the business, after a short amount of time, Dykstra was forced to declare bankruptcy. His downfall continued with legal troubles, as he was arrested in 2011 for grand theft auto, possession of narcotics, federal bankruptcy fraud, and indecent exposure.
Evander Kane, NHL
Evander Kane, currently a left-winger for the Edmonton Oilers, has earned roughly $68 million during his 15-year NHL career and still has two years remaining on his current 4-year, $20.5 million contract. However, he filed for bankruptcy in 2021 after one of his creditors sued not only Kane but the San Jose Sharks, where Kane was playing at the time, over his non-payment of debts. It turned out that Kane was a compulsive gambler, owing hundreds of thousands of dollars. To make matters worse, he was borrowing money to pay them back from banks like Centennial, which claimed Kane owed them $8 million. In total, Kane borrowed almost $50 million over five years and ended up owing creditors more than $26 million. He ended up selling at least one of his homes to pay back his debts, as they were his only remaining assets.
Curt Shilling, MLB
Curt Shilling is a former MLB pitcher. His financial downfall happened as a result of a bad investment in his own video game company, 38 Studios. Shilling invested a large amount of his own money in the creation of this company. When the company ultimately failed, he lost a great portion of his wealth, as it was concentrated in this one investment.
Lawrence Taylor, NFL
After his legendary career in the NFL, Lawrence Taylor got into business and legal troubles that negatively impacted his finances. He started a company, All Pro Products, but had large losses when his associates defrauded him. His business problems, along with arrests and drug-related issues, all contributed to his financial downfall. It is said that Taylor lost $50 million. Taylor's off-field behavior had a big impact on his financial future.
Financial Success Stories of Some Professional Athletes
Some athletes not only achieve greatness in their chosen sport but also accomplish amazing levels of business success. The financial success they achieve after their career ends gives them financial security. Their stories are inspiring for young athletes who are searching for ways to make their career earnings last a lifetime. Their wise financial decisions show how smart money changes everything for themselves and their families.
Brandon Copeland, NFL
Brandon Copeland, who had a seven-year NFL career playing outside linebacker, spent time off the field teaching a financial literacy class at the University of Pennsylvania. He came up with this idea to help students become more financially prepared for the future. During his playing days, he practiced what he currently preaches by saving roughly 90% of his earnings, with 60% of that being invested.
Ron Gronkowski, NFL
Rob Gronkowski, four-time Super Bowl Champion tight end with the New England Patriots and Tampa Bay Buccaneers, revealed in his 2015 book, It’s Good to Be Gronk, that he saved all of his NFL salary for the first eight seasons of his career. Instead, he lived off of his endorsement deals until he felt his NFL career was stable. He has remained smart with his money and advises younger players to do so as well.
Glover Quin, NFL
Glover Quin, who had a 10-year NFL career as a defensive back, lived comfortably off of 30% of his salary, investing the remaining 70%. In 2016, eight seasons into his career, he had doubled his money. He retired from the NFL in 2018 and his smart money management has set him and his family up comfortably for the future.
LeBron James, NBA
What is the net worth of LeBron James? Forbes magazine shows his real-time net worth as of January 17, 2024, as $1 billion. He is ranked #2482 in the Forbes list of the richest people in the world. His salary from his basketball career has been estimated to be $430 million, to date. Forbes estimates his endorsement and business deals to have added $900 million to his net worth. His financial skills in entrepreneurship and the equity positions he has taken in companies he helps promote, such as Beats by DRE and Blaze Pizza, have made him a billionaire.
Serena Williams, Tennis
Serena Williams was a major force in women's tennis and continues to leave her mark with her successful business ventures. She has owned a venture capital firm, clothing and jewelry companies, and has dozens of brand endorsements. Her on-court earnings reached $95 million, while her earnings from business deals are said to be about $350 million.
Arnold Palmer, Golf
Golf legend Arnold Palmer was one of the greatest golfers of all time. He also became a successful businessman. Palmer's business ventures included endorsements, golf course design, and ownership in various enterprises. The Arnold Palmer brand, including the famous iced tea and lemonade mix, has contributed to his lasting financial legacy
Michael Jordan, NBA
We saved the best for last. Michael Jordan, known as the best basketball player of all time, is worth over $3 billion and is the first athlete to be ranked among the Forbes 400 richest people in the U.S. His income from his basketball career was a significant factor in his wealth accumulation, but his investments and partnerships are where he creates most of his wealth. Most notably, his partnership with Nike created the iconic Air Jordan brand.
Unprecedented Contract - Ohtani
Even in the high-paycheck sports world, Shohei Ohtani's contract with the Los Angeles Dodgers is unprecedented. Ohtani, the greatest two-way player baseball has seen since Babe Ruth, signed a 10-year, $700 million contract with the Dodgers in the 2023 offseason. However, he is deferring $680 million of it and will receive the bulk of that money between 2034 and 2043, without interest. Therefore, Ohtani will receive $2 million per year throughout his agreement, saving the Dodgers from exceeding the luxury tax, which would cost them more money and draft picks. Similar to Gronkowski, Ohtani makes enough endorsements to comfortably live off of that for the length of the agreement.
One positive the deal could provide is tax benefits if Ohtani leaves the high-tax state of California when his contract with the Dodgers ends and before receiving his deferred income. Some negatives that could come out of the deferral are that Ohtani could face higher federal tax rates on the deferred payments, the time value of money, and the simple fact that he cannot spend or invest $68 million per year over the next decade.
Lessons From The Financial Mistakes and Success of Professional Athletes
These stories emphasize the need for athletes to prioritize financial education, make informed decisions, and seek professional advice to secure their financial futures. The examples highlight the challenges athletes can face if they do not manage their finances responsibly.
Some common financial troubles experienced by the athletes were:
Overspending
Trusting the wrong people
Lack of financial education and understanding of the investments they were making
Bad investments
Bad behavior off the field which negatively affected their finances, such as drugs, alcohol, arrests, misconduct, fraud, theft
Gambling
Investments that were not diversified, but rather concentrated in one company
Of the financially successful athletes, common behaviors include:
Saving and investing a majority of their salaries during their careers
Equity deals in companies they were endorsing
Entrepreneurship and business ventures with trusted partners
Investing in their financial literacy education
The Game Changers of Wealth
Some of the game-changers that differentiate the athletes who are financially successful from those who fail to secure their financial future are:
Financial Literacy Education
Financial literacy education is the game changer - athletes who invest the time to learn about financial matters can make better-informed decisions
Investments in Future
Strategic, diversified investments - not putting too much of their money at stake in one venture and providing them with multiple income streams.
Branding and Endorsement Deals
Athletes leverage their fame and influence for lucrative endorsement deals and partnerships that can help build a significant income for the athlete.
Trusted Advisors
Lots of people are ready to take advantage of athletes who entrust them with the management of their money.
The Bottom Line
In the world of sports, the game changers of wealth are those athletes who strive to educate themselves in financial matters, make strategic investments, venture into entrepreneurship, and collaborate with knowledgeable and trustworthy financial advisors. Smart money decisions not only secure their financial future but also empower them to make a lasting impact beyond their athletic careers. By diversifying their income streams and making informed choices, these athletes have built financial legacies that extend far beyond their athletic achievements.
These stories reinforce the need for athletes to exercise caution in financial matters, seek professional advice, and make informed decisions to avoid the pitfalls that can lead to financial hardship. Additionally, these stories emphasize the unique challenges athletes face in maintaining financial stability. From overspending to poor investments, these stories underscore the importance of financial literacy, responsible money management, and making informed decisions beyond the playing field.
From the Ohtani contract, we can see some positives and some negatives. It probably would have been a positive if Vince Young, Lenny Dykstra, or Evander Kane couldn’t touch the majority of their salaries during their playing days, like Ohtani. But for Brandon Copeland, Gronk, and Glover Quin, not being able to save and invest the far majority of their salaries during their careers would not have been a good thing because they were able to set themselves up for the future through smart money management.
Only time will tell which road Ohtani will go down in the future.
Final Takeaway
Because professional athletes often earn substantial wealth in a short period, it is crucial for them to protect and manage that wealth wisely. By developing smart financial habits, they can secure their financial future long after their playing days are over. The lessons they learn about money management are just as valuable for the rest of us—we can all benefit from making informed decisions and develop positive financial behaviors that set us up for long-term financial success.
Smart Money Changes Everything is strictly a financial education website. The information presented in this post is solely for your general financial education and is not to be considered financial advice. Always check with your trusted financial professional team who will consider your unique situation and goals to develop your own personalized comprehensive financial plan.
