Have you ever wondered how so many athletes go broke after retirement so often? After all, Latrell Sprewell and Antoine Walker were both worth over $100 million, and yet within five years of retirement, each was essentially bankrupt. How, you might wonder?
Fortunately, the BUSINESS INSIDER published a handy 11-point list on how to accomplish exactly that. The list is full of the usual suspects: bad investments, families magically growing exponentially upon the first signed contract, drugs. You know, exactly how you’d expect people lose money. But rather than look at the situation as what not to do - after all, how do you “not” have greedy relatives if you’re a millionaire? - why not approach the situation as a series of suggestions on what to actually do? A few tips below.
1) Hire a reputable accountant, and let him or her take care of damned near everything.
This is the A-one, most important step. Odds are, an athlete coming into the league is not at all qualified to manage millions of dollars (lord knows we couldn’t be trusted with even $100 back in our early 20s). So hire somebody with a great deal of experience - but not a friend - tell them exactly what financial goals you have in mind (for the purposes of this exercise, let’s say they’re “save 50% of my post-tax income for after retirement and never go broke”), then follow this person’s advice.
2) Refer all money questions to said accountant.
And this is exactly why you take step one. Because while you, star athlete, may not be willing to tell a cousin “no” when they come with open hands, that accountant of yours almost certainly has no problem doing exactly that. We’re not saying all athletes must keep all their money for themselves, but it’s easier to keep track of money given out (or “loaned”) when it’s capped at, say, 5% of post-tax income and there’s someone whose sole job it is to hand out the money in a responsible manner.
3) Limit the amount of money that can be lost to failure.
Nobody’s a perfect investor, and pretty much nobody wants to look back on their life and realize they were on some Scrooge McDuck trip while other people were “making their money work for them.” At the same time, the name of this thing is how to not lose millions of dollars the way athletes do, and if there’s one great way to do that, it’s by tying up lots of their money in bad investments. Look at what Raghib Ismail got caught up in:
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.
Again - this is just one player. Bad pitches are going to come from left and right, maybe one of them’s going to work, but beware the temptation to sink everything into something as ethereal as an idea. Sure, three years of a rookie minimum contract won’t last forever, but they do need to last more than three years.
4) And for crying out loud, do not break the terms of the contract.
Not supposed to ride a motorcycle without a helmet? Then don’t. Not supposed to smoke weed? Then don’t. Anything that’s expressly forbidden in conduct clauses is forbidden for a really good reason, and it’s to keep the athlete as likely to be healthy and productive as possible. Moreover, if a season starts to go sour or ownership starts looking for reasons to get out of a contract - like a particularly stupid arrest - all that money you were banking on could go away.Yes, smoking weed is fun and its legality is worthy of debate, but if you’re getting $10 million a year to play ball and not get high, please, adjust accordingly.
So, to recap: an accountant could be your most important investment, do what your team tells you, and watch those hands. Also, good luck with investing, because you might need it. Of course, talk with your advisor, all situations are different, etc. etc.