Trivia time. Can you tell me what the following people have in common?
Okay, they’re athletes. But there’s more to it than that. The thing that’s unique about this particular group of athletes is that they were some of the top athletes in their respective sports. They were the ones with multimillion-dollar contracts and endorsement deals1 somehow they ALL ended up broke.
And it’s not just the athletes listed above – I’m sure you can name at least five or six more near-penniless former star athletes. Why is this so common? The most popular explanations are that these are the athletes who spent excessively, had too many kids, picked the wrong investments, or any number of reasons that may be equally valid. However, in my opinion, the reason every single one of these people went broke is because they didn’t respect Father Time – and his impact on their future income.
Imagine that someone gives you the opportunity to make $5 million per year for the next 10 years — for a total of $50 million. Of course, most professional athletic careers only last about 3 years, but let’s say you’re one of the exceptions, like Kobe Bryant or Tom Brady. So, after 10 years, you’ve $50 million – but it’s not all yours to keep. You have to pay Uncle Sam, of course. But you also have to pay your agent, and you might have to take care of your kids or your parents. You may find that your friends come to you for money, too – and depending on how generous you are, you might take care of them. You’ve got to take care of yourself, too.
You’re 20 years old. It’s very likely that you’ve never met anyone who made or had to manage that kind of money. You’re flying blind. So guess what happens? You make mistakes. Expensive ones. And you make a lot of them. Then, your career ends, and, well, you’re screwed. And broke.
This happens to regular people, too – just on a smaller scale. Hell, I’ve been guilty of buying too much crap that I didn’t really need. I’ve also lost hundreds of thousands of dollars in investments gone wrong.
So, why didn’t I end up broke? Because in my line of work, time is on my side. Or, at the very least, it’s not actively working against me.
We all get older. There’s nothing we can do about that. But when you choose a career that depends on your ability to run fast, jump high, throw a ball, etc. – your earning power will decline much faster than someone whose career is based on non-physical skills. My financial value has increased as I’ve gotten older and more experienced. Barring a permanent disability or catastrophic event in my life, I will be able to generate an income well into my 70s. This is why one or two crappy decisions or bad investments won’t be the end of the world for me.
And this is where I think athletes really screw up: They forget that Father Time is marching on. Their minds may be willing to get out on the field or into the ring, but their bodies may not cooperate (to a degree, this could also be said for models, actors, dancers, or anyone else who makes a living based on their physical attributes). Their earning power is finite, so they can’t afford to make the same financial mistakes the rest of us do.
Have you ever noticed that there you never see articles about famous, million-dollar coaches going broke? They don’t need to be in peak physical shape to earn money. They can work well into their 70s.
So it’s a tradeoff: Athletes make millions of dollars, but their careers are notoriously short, and they may have to make their money last for the rest of their lives. Most people like you and me probably aren’t going to pull in several million dollars a year, but we don’t have to worry about our careers being over before we turn 30. What’s more, if we work hard, continue to grow our skills, or develop a side hustle, we have the chance to make a million dollars one day – just not all at once.
I don’t know about you, but I think we got the better deal.
 Of course, pay for a “superstar” athlete can vary, depending on the athlete’s gender. For example, a WNBA player like Sheryl Swoopes likely made 78 cents for every dollar that NBA player Antoine Walker did. And if that pisses you off, well, it should – but that’s another topic in itself.