Why Pro Athletes Go Broke
The factors contributing to financial ruin are numerous. Most people receiving a sudden windfall would be tempted to spend a good chunk of it quickly. This tendency might be pronounced when there's a sense of entitlement -- these are star athletes who have heard how great they are all their lives, after all.The article continues with:
"When a 21-year-old kid gets such big numbers, they go out and buy the big house and the fancy car," said Robert Luna of SureVest Capital Management in Phoenix and the financial adviser to Arizona Cardinals offensive lineman Levi Brown. "Before they know it, they're out of the league and their income drops significantly."So what does the average NFL player look like? Let's look at the numbers:
Average NFL player salary? $1.9 million
Average NFL player career length? 3.5 years (However, this is debated, with some claiming this number is closer to 6 or even 9 years.)
Average NFL player age? 27However, these numbers don't tell us much other than the average NFL player is young, makes a sh*t-ton of money, and enjoys a relatively short career (though, 'enjoy' may not be the appropriate verb here). Aside from the various social issues we could broach, it's really an issue of financial literacy. And though we're all confident we'd be better suited to slow-burn all that hypothetical cash in a parallel universe where we exist as pro athletes, the reality is actually more sobering (in this universe, at least).
Sobering UpIf you're in need of a good cry, performing a simple Google search will return enough results to make you weep deeply for the financial future of your fellow man. For a culture that prizes conspicuous consumption and values the accumulation of material wealth as a means of attaining happiness, ironically most of us don't know jack about managing our finances. And we'll admit it, too. According to the 2011 Consumer Financial Literacy Survey Final Report, 2 in 5 Americans would give themselves a C, D, or F for their understanding of personal finance, and nearly 3 in 4 feel they could benefit from the advice of a financial professional. Nearly 50% are concerned about having insufficient retirement and “rainy day” savings and more than half do not maintain a budget or track expenditures. And if you were looking for additional salt for that wound: 43% of American workers have less than 10k in retirement savings. (Hint: if you expect you'll need $3,000/mo in retirement, you'll need over $500k in savings...) INFOGRAPHIC: How much do you actually need to retire?
But don't fret. All is not lost!Whether it's witnessing the older generation bear the brunt of the recession or growing up with web-enhanced technologies (or perhaps a little bit of both), younger generations are taking a more social approach to their finances. TD Ameritrade's Annual Investor Index Survey Series reports that:
60% of those ages 22 to 34 say that they turn to friends, relatives and colleagues to stay informed about news and events shaping the economy and financial markets, compared to 43 percent of those in their parents' (Boomer) generation and only 31 percent of those in their grandparents' age (Mature) who felt the same. And, if they can't get help from Mom and Dad or a trusted co-worker, these younger investors are not afraid to look to social media for guidance. This "wisdom of crowds" approach to finance could be the reason one in three (33 percent) Gen Y respondents selected social networks as a valued source of financial information.
Learn the Language of FinanceLudwig Wittgenstein said "Language disguises thought." And the ancient Athenian playwright Aristophanes allegedly stated "High thoughts must have high language." In college, I had a linguistics professor who encouraged us to approach new problems or even a new job the same way we would a foreign language. Anyone who has learned a second language knows precisely what she means. Without the vocabulary and the knowledge of how to use it you have no frame of reference, like a child who wanders into the middle of a movie...you're simply out of your element. Personal finance is no different. Learn the language first, then apply it. And talk to people around you. You'll probably surprise yourself.
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