3 Money Lessons From Pro Athletes Who Went Broke
Don't just cheer from the sidelines. Learn from superstars who made big mistakes so you finish ahead of the game.
More than a decade ago, I was drinking in a New Jersey bar with a fairly well-known Major League Baseball player. The bar is called the Stone Pony, and it’s a local legend in its Asbury Park neighborhood. Maybe that’s why the star athlete decided to buy it -- right then and there.
This was, of course, a terrible idea. I’ve written before about the right and wrong way to buy real estate, and there's really no worse way to buy a bar than while drinking on one of its barstools.
Having known many pro athletes over the years, I said nothing. I merely gave him a noticeable look of disapproval and hoped he would change his mind once the alcohol wore off.
While many professional athletes have sought my financial advice, the past two decades have taught me no one wants unsolicited advice, especially about money.
Fortunately, this ballplayer called his agent with his beer-soaked plans -- and the agent quickly put an end to the crazy idea. That’s rare in itself. Agents generally do the bidding of the athletes who pay their commissions, even when it's not necessarily in a client’s best interest.
In this case, the agent stood up for himself and for his client. The ballplayer backed down and was spared from an expensive education in how to lose money. Sadly, it doesn’t often work out that way. Stories of bankrupt pro athletes are as common as pop flies.
Here are three mistakes I've seen pro athletes repeat over the years.
1. Counting on always having your salary.
Athletes know their earning potential is brief. Except for rare cases, they play knowing they'll likely be washed up in their 30s. And even the younger players realize they're one injury from losing out on millions.
The best athletes I’ve known live in the moment but save for the future. The worst ones spend all their money as soon as they get it (and not always on what I'd call essentials).
So while Mike Tyson once famously bought a Bengal tiger for $140,000, Serena Williams simply deposited her first $1 million check in the bank. In fact, she naively tried depositing it through the drive-in window, “and then they were like, 'I think you need to come in for this,' and so I ended up going inside."
Tyson went bankrupt. Williams is worth more than $80 million.
The lesson for the rest of us: Nothing is more deadly than entrepreneurs who finally hit it big. They resemble athletes who sign huge contracts and feel like they've made it. Instead of remembering where they came from, they reward themselves with frivolities and expect the money train to never run off track.
2. Trusting the wrong people.
Back in June, Sports Illustrated reported on former NFL running back Clinton Portis. These days, it's seldom good news when a former athlete makes headlines. Here was the hook on Portis' story: “Away from the NFL spotlight, financial ruin drove Clinton Portis to the brink of murder.”
Portis admitted he thought about killing a former manager -- he actually had a gun -- who had lost much of the $43 million Portis made during his career. Portis filed for bankruptcy in 2015.
How does this happen? Athletes are busy people, and they’re often celebrities with a small circle of friends. They trust, but they seldom verify. Some put unqualified friends in money-management roles. Others are lured by slick agents and managers who are better at sucking up to stars than they are at making investments.
The lesson for the rest of us: I’ve seen entrepreneurs whose growth outstrips their team’s ability to manage new complexities when their businesses suddenly take off. Just like the athletes on the field, they’re busy doing the profitable work. They don't check what's going on behind the scenes.
Every entrepreneur needs at least one knowledgeable but unofficial adviser. Many athletes come to me on referral. When they look up my reputation, they see I've covered this territory before and will give them the bad news if they need to hear it. I have people who fill that critical role for me, too.
3. Playing the game the way you handle your own money.
Athletes are trained to leave it all on the field, court, course or ice. They take big risks to win big. They carry that confidence into other areas of life, too. Because they believe themselves invulnerable, they sometimes invest in ventures they know nothing about. Think of all the athletes who've opened (and later closed) restaurants.
Had that ballplayer at the Stone Pony bought the place, I've no doubt the legendary bar would have struggled. Maybe it wouldn't have survived. That MLB star still was playing 162 games a year. And turning day-to-day management over to an inexperienced relative or a friend probably wouldn't have ended up any better.
The lesson for the rest of us: Entrepreneurs know -- or they learn fast -- that the path to success isn’t meant for walking. It’s meant for sprinting. Those who fall have to get back up and keep going.
Personal money needs to be marshaled differently. Entrepreneurs need to amass a big chunk of wealth to rely on when their building days are over. Smart business owners know they can't play forever and that no one is invincible. The market can be a hard place, capable of driving the best of us to our knees in a New York minute.
Entrepreneur Leadership Network Writer