I’d like to dedicate another blog post to the issue of athletes and financial literacy. Around the time of my previous post on the topic, NPR featured a story about professional athletes and their financial literacy (the link is provided at the end of this post). The article mentions Kenny Anderson, who earned more than $60 million during his 14 years in the NBA, yet declared bankruptcy the year his career ended. The story goes on to talk about what happens when athletes acquire great wealth without having a clue about money management. Even in the NFL, which has the most college graduates, players often do not have any experience managing money, including what they might learn from paying for a college education, as they generally attend college on a scholarship.
I sent the NPR story to Reggie Howard, who is the President of the United Athletes Foundation and cares deeply about this topic. His reply came back with even more sobering information. He was just informed that 15 athletes in one city alone have been victimized by a single financial advisor. Each athlete gave the advisor’s agency control over their bill payments and money management and all got a bad deal. No one ever talked about it, which allowed the advisor to continue to use the same method on each player. Reggie was outraged and ended his message with the passionate tone he uses when he talks about victimized players: “This subject really gets my blood boiling. We have to change this.”
Stories like this one illustrate yet again the dire consequences of financial illiteracy. Unfortunately, professional athletes—newly wealthy, young, and inexperienced—are ideal targets for scams or unscrupulous advisors when instead good financial planning is the thing they need the most. Even for those making very sizeable incomes, there is no guarantee that the money will last a lifetime; athletes’ career paths are very unique (for example, they can be quite brief) and risky (a serious injury can put a quick end to a high income), and this requires even more skillful money management than normal. Sound planning is needed to make sure that money will extend well beyond the careers of players, that it is invested to grow over time, and that it is not squandered in unsustainable lifestyles or in risky investments that players do not understand or have experience with. And athletes need to know how to protect their wealth, including how to avoid bad advisors and unscrupulous agents and how to make good decisions when presented with well-intended requests or investment suggestions from friends.
We cannot expect all professional athletes to be experts in dealing with money. They become wealthy very early in life, before they have had a chance to gain any experience in dealing with financial matters. Their colleagues are mostly other athletes or sports professionals, so it is not possible to get much help from their peers. In my view, some money management has to become part of the standard, ongoing services that are offered to athletes. In the same way that it is standard for athletes to have coaches, doctors, and managers to help take care of their physical fitness, so it should be standard to have help in taking care of their financial fitness. And this help has to be specialized, designed to fit the needs of the very specific career that athletes face. Finance and financial decisions are too important, with potentially profound consequences for athletes' lives, to just be left for the athletes to figure out on their own.
Like Reggie, I detest the idea of athletes going bankrupt. It is not just the fact that it is unjust, unnecessary, and ugly as hell. It is also that we look up to and admire these people. Unlike them, we cannot bound up two flights of stairs without gasping for breath, we have back pain from sitting long hours at a desk, and we have boring jobs and screaming children. But when we see these athletes play, they make us dream. We believe they are special and we admire their skills and talents. This is why we get very upset when we find out that an athlete has, say, a gambling problem or beats up his spouse. In our eyes, they are better than we are, and they should do better than we do. And to young people, athletes are practically superheroes. Telling kids about athletes’ financial troubles would be like breaking the news that the Bat mobile has been repossessed. If athletes are in financial trouble, then, well, they are just like the rest of us. I’d like to see them be better equipped to make good financial moves; maybe if they can do so, the rest of us will follow.
Here is the link to the NPR story.