Why Do So Many NFL Players Go Bankrupt?

Why do so many NFL players go bankrupt?

By Chris Chase

Within two years of retirement, 78 percent of NFL players are bankrupt or in severe financial distress. Unlike Rocket Ismail, most of those players can't blame it on the negative karma associated with getting a bear hug from Michael Irvin.

How is this possible? The minimum salary for rookies in 2009 is $310,000. That jumps to $460,000 for two year veterans. How can men who earn so much have so little after retirement?

The Business Insider looked at that question today and listed 10 ways that sports stars destroy their finances.

Most of the reasons fall under the umbrella of one of the ways, "Act Dumb". (These include "Do Drugs", "Fight Dogs" and "Have Too Many Children". Two outta three ain't bad, Michael Vick(notes).)

Other paths to financial ruin like "Put Money in a Ponzi Scheme" or "Invest Too Much In Real Estate" can be more about bad luck than anything, but never underestimate the power of habitually poor judgment. (Or stupidity. Tomato/Tomahto.) Case in point, here's a blurb from the "Making Bad Investments" entry:

Rocket Ismail also squandered a fortune funding an inspirational movie; the music label COZ Records; a cosmetics procedure whereby oxygen was absorbed into the skin; a plan to create nationwide phone-card dispensers; a Rock N' Roll Café, a theme restaurant in New England; and recently, three shops dubbed It's in the Name, where tourists could buy framed calligraphy of names or proverbs of their choice.

That sounds like the business plan of Kramerica Industries. Any one (or two) of those things by themselves would qualify as bad investments. Put them all together and you can understand how Ismail blew through $20 million in salary. (Of the calligraphy store, Ismail says its failure can be blamed on Hurricane Katrina. The cosmetics procedure: "sharks in the beauty industry". The Rock N' Roll Cafe: It being a Rock N' Roll Cafe.)

Ismail's case is more the exception than the rule though. The 78 percent number is buoyed by the fact that the average NFL career lasts just three years. So, figure a player gets drafted in 2009, signs for the minimum and lasts three years in the league: He will have earned about $1.2 million in salary. Factor in taxes, cost of living and the misguided belief that there will be more years and bigger paydays down the road, and it becomes a lot easier to see how so many players struggle with money after their careers end. Nobody plans on playing just three years in the NFL, you know?

Oprah did that social experiment where she gave a homeless man $100 thousand dollars and before he knew it, he was back on the street again. Of course, he managed to buy a decked out $35,000 truck in the process and buy one of his homeless friends a cheaper car.

Is it possible that aside from the efforts required to generate wealth, this might be part of the reason for that concentration of wealth? Some are just better at not only creating wealth, but retaining it, and growing it?

Son kept NY socialite Astor in squalor: prosecutors

NEW YORK (Reuters) - The son of the late U.S. philanthropist Brooke Astor used his mother's dementia to enrich himself at the expense of her favorite charities, prosecutors said on Friday in the high-society trial.

Anthony Marshall, Astor's 85-year-old son, was charged in 2007 with grand larceny, criminal possession of stolen property and falsifying business reports tied to his handling of his mother's fortune, estimated to be worth hundreds of millions.

She died from pneumonia in August 2007 at the age of 105.
...
Astor had married Vincent Astor, heir to the real estate fortune of John Jacob Astor. She inherited about $60 million, which grew over the years, allowing her to leave some $195 million from her estate to charitable groups, including the Metropolitan Museum of Art and the New York Public Library.

What percentage of concentrated wealth was actually "created" by the person holding the assets? IE, how much of concentrated wealth is owned by people like Bill Gates, who created the wealth, and how much is owned by people who were merely born into wealth or did nothing to earn it?

People like these:



http://www.reuters.com/article/do...0220090919

Astor had married Vincent Astor, heir to the real estate fortune of John Jacob Astor. She inherited about $60 million, which grew over the years, allowing her to leave some $195 million from her estate to charitable groups, including the Metropolitan Museum of Art and the New York Public Library.

Most wre never taught how to manage money because they did not have a lot to manage.

Looks like his mother not only handled her inheritance well

No, she just screwed the right men:

http://en.wikipedia.org/wiki/Brooke_Astor

Though she was appointed a member of the board of the Astor Foundation soon after her marriage, upon Vincent Astor's death in 1959, she took charge of all the philanthropies to which he left his fortune. Despite liquidating the Vincent Astor Foundation in 1997, she continued to be active in charities and in New York's social life. The New York Public Library was always one of Astor's favorite charities. As a result of her charity work, Astor was awarded the Presidential Medal of Freedom in 1998 (by Bill Clinton). Her life's motto summed up her prodigious generosity: “Money is like manure; it’s not worth a thing unless it’s spread around.”

Athletes, especially NFL athletes, aren't really the best sample. Information is coming to light about the effects of repeated head trauma, even low-level impacts, and it's scary. I wonder if getting smacked in the head a few times a week since they were 14-15 is contributing to the bad decisionmaking at 22.

Athletes, especially NFL athletes, aren't really the best sample. Information is coming to light about the effects of repeated head trauma, even low-level impacts, and it's scary. I wonder if getting smacked in the head a few times a week since they were 14-15 is contributing to the bad decisionmaking at 22.

....and built a small fortune into a much larger one.....

I doubt it's because of that. Basketball players have similar such money problems.

MJ had similar problems as well and all he did was sing.