Personal Finances

[quote]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?

Related: Michael Vick.[/quote]This is a report to tap into the experience of members who know a lot. For example, Sidney, Exon, Hunt99, Jackson, Rock Harders and many more.

If conserving your net worth or increasing your net worth is a concern, there are many people who know a lot.

Believe me, I wish I knew before what I know now (which is not much)

It does not surprise me that NFL players, with an IQ of a turnip, end their career bankrupt. The idea is to avoid that scenario.

Professional athletes going broke, or struggling mightily after a short career is understandable because most of these guys never had money to begin with (money does not suffer fools gracefully) they are rather young, and they do not live below their means and invest wisely - the opposite, in fact.

But, since I have been back in the USA (5 months now) I see that most "successful" Americans, those that had an income of 6 figures plus, are re-evaluating their worth, their income potential, and their buying habits. These are not only the football players, but almost any "normal, well behaved Realtor, insurance sales person, mortgage specialist, and the like".

It seems we just have gotten out of a decade in which everyone, even the postman was a "millionaire" (someone who had multiple homes, read the stock market with interest, and had access to 2 plus years annual earning on credit with no problem) Those days are gone gents!

I have tried three ad campaigns in four months. The first two should have worked in the economy of 2006. But nowadays there are just tire kickers, few buyers. Marketers are having to do much more work to generate the same sales as before. I think this is the new reality.

I had dinner with some highly placed execs at the FDIC last week. I asked the question any horney / mongerer wants to know. "when is it going to get back to normal." Every eyeball at the table got real big - they look like they new an awful secret and was being called to confess - the consensus was that we are going to re-establish normal, and it is going to be a lot less opulent and fun than before.

I don't mind things getting a little tight. Things are not impossible. There are still many ways to get ahead. Even in a recession, the economy is big with many possibilities. However, it did not FEEL to me like we just lived through the roaring 20s, but in fact we may have just done so.

They are probably rolling their eyes at the commercial real estate market which is going down the tubes in 2010 to 2012 when all the over priced mortagages on construction during the "boom" start rolling due and the delta between what the original loans and the current market value is going to kill the market again.

Folks in the construction and commerical real estate business already know this is coming but no one else seems to see it on the horizon. It's going to get really bad with another round of high dollar forclosures when they can'nt come up with the cash to bridge the delta.