You might be surprised to know that National Football League (NFL) is the most lucrative pro sports league in the country. As of 2014, the League raked in the moolah to the tune of $1 billion out of $10.5 billion revenue. And according to the analysts, this figure is expected to improve further in 2015.
So, it's a typical dollar minting machine for the U.S. sports teams. But, how could so many of the players from such a lucrative professional background end up with broken banks?
Here are some of the most interesting case studies for you to learn the important lessons of smart money management.
Case Study #1
NFL Player’s name: Michael Vick
Teams played for: Atlanta Falcons (2001-2006), Philadelphia Eagles (2009-2013), New York Jets (2014) and Pittsburgh Steelers (2015 - present)
Career span: 11+ years and counting
Total Career Income: $130,000,000
Money mistakes committed
- Though not necessarily a money mistake, rather a career mistake, yet his 23 months imprisonment for running ‘a dogfighting ring’ took a heavy toll on his annual income.
- Vick was suspended without pay by the NFL leading to a subsequent loss of lucrative endorsement deals worth millions. As a result, he lost $130M during his suspension.
- He was reportedly a financial wreck as he had an entourage of 30 people, costing him millions. Moreover, he took out a loan worth $1.1 million from Wachovia Bank to fund his restaurant and wine business and defaulted on a loan of $2.5 million taken from Royal Bank of Canada for real estate development.
- Upon his Chapter 11 bankruptcy hearing, he declared expenses of $18M during his stay at the prison. He had a debt of $20 million as of July 2008 with 45 claims worth $18.97 million reported against him. He needs $400,000 more to get back in the black, after signing a $100M deal in Philadelphia, alongside other endorsements.
Read more: Chapter 11 bankruptcy overview
Financial lesson for you
- Become a noble citizen - Stay away from the long arms of the law. This would have saved Vick hundreds and thousands of dollars in penalties, attorney fees, legal documentation and other ancillary costs.
- Become frugal - To be frugal, you don't have to be a miser. Create a budget and stick to it. Spend when necessary, or else, keep your dollars for the rainy days. Avoid friends that ask you to make bad purchases. And if you can't avoid them at all, then decline their offers or suggestions, in a polite but firm voice.
- Become a planner - You need a retirement plan to direct you to save for your golden days. So, you can always invest in a 401(k), Individual Retirement Account (IRA), etc. and save your money in a savings/checking account. Doing so will give you handsome returns in the long run when you retire besides those lucrative tax concessions, as a short term benefit. This can pave the way to financial solvency for him. Read more - Retirement days are fast approaching: Tips to get ready if you are not
- Become a smart investor - You need to get your finances in order and start from the basics, before scaling up your risks in the markets. Moreover, you need to set proper investment budget and goals that would be your guiding light in times when you feel confused. Apart from that, you need to set up your ‘risk tolerance’ quotient as well as investing style - parameters that depends on your income needs, goals and age. Finally, you need a broker or a human advisor to help you set things straight when you go weak in your knees if financial markets crash and you end up losing most of your investments.
Case Study #2
NFL Player’s name: Terrell Owens
Teams played for: San Francisco 49ers (1996–2003), Philadelphia Eagles (2004–2005), Dallas Cowboys (2006–2008), Buffalo Bills (2009), Cincinnati Bengals (2010), Allen Wranglers (2011), Seattle Seahawks (2012).
Career span: 16 years
Total Career Income: $80,000,000
Money mistakes committed
- Owens blindly followed his financial advisors who lured him into making bad investment decisions like Alabama entertainment complex - an illegal venture that set him poorer by $2 million.
- He was also charged with violating NFL’s guidelines for players that prohibited him from investing in gambling.
- He bought several real estate properties as a means for rental income before the housing market came crashing down. His Los Angeles home cost him $499,000. Moreover, he also owns a multimillion dollar home at Atlanta that has been listed for sale. Apart from that, he had to sell his $3.9 million New Jersey home for just $1.7 million in 2010.
- He also has to pay $44,600 every month as child support for his four children, all aged between 5-12. Sadly, 3 out of the 4 mothers have filed lawsuits against him.
Financial lessons for you
- Become a sharp investor - You, as an investor, should think twice before blindly throwing your money into an investment option. No matter what, when your money is at stake, it's you who should take the final call and not an expert. In case, you have a doubt over your financial advisor’s options, then have that clarified immediately. It's your right to ask questions and get appropriate answers, as you are paying for his services. So, never follow financial advisors blindly.
- Become an educated investor - Research and learn about investments. Buy some popular books on investment like Rich Dad, Poor Dad (2000) by Robert Kiyosaki, The Essays of Warren Buffett: Lessons For Corporate America (1997) by Warren Buffett, Beating the Street (1994) by Peter Lynch, The Intelligent Investor (1949) by Benjamin Graham, etc. Never bet the major part of your savings on real estate or a business. In addition, it's always preferable to decline to sign on loan papers as a guarantor along with your other investments.
- Become a better spouse - Almost 50% NFL players get divorced since their wives feel as if their husbands are another child in the house to look after. Once retired, a player shifts from a structured environment he has had all his life such as a prominent social status, a regular income and fame to oblivion; trying to find a purpose in his life that worked just fine around him all throughout his career. This makes him anxious or depressed. So, you need to add value to your household, fight off anxiousness or depression by seeking timely medical attention, and work your ways around rebuilding a sense of purpose post retirement.
Always bear this fact in mind that success in the National Football League didn’t save the stars from bankruptcy. Similarly, in whatever walks of life you come from, never take your financial security for granted. Always keep your eye toward saving more, instead of earning more!
