The Athlete Vulnerability Issue
We consider athletes to be amongst the most financially vulnerable persons of our times and the statistics globally support this claim. There are various factors contributing to the financial vulnerability of athletes:
• Athletes earn substantial amounts of income but within the limits of a short time span, usually 10 to 15 years. The average annual salary of an athlete can be anywhere from 50 to 100 times more that the average household income both in the US and Europe. The end of the athlete’s field play usually marks the end of the substantial earnings both from field play and from other sources such as image rights exploitation, endorsements, etc.
• Athletes’ earnings are extremely volatile. Most of the times their salaries are not fully guaranteed and, in addition, poor performance, injury, on and off field behavior can adversely affect their earnings capacity.
• Athletes earn their money at a very young age. Athletes’ earnings peak at the age of 25 to 30 and then take a huge plunge by the age of 35, as opposed to the rest of the normal work force who reach peak earnings between ages 39 to 55. A lot of athletes leave their home countries at a very young age and they tend to overspend to compensate for things that are missing in their lives such as family and friends.
How athletes do financially after retirement has been a matter of extensive research. The statistics are compelling and the magnitude of the problem is obvious.
• Despite the exorbitant professional athlete salaries, within 5 years past their retirement, 60% of former NBA players have gone bankrupt or are under financial distress.
• Approximately 25% of NFL players report financial difficulties in the first year after retirement and within two years removed from their last game, 78% of all NFL players are divorced, bankrupt, or remain unemployed.
• Research by XPro, a charity for ex-players, suggests that three out of five UK Premier League players, who earn an average of STG 30,000 per week, declare bankruptcy within five years from retirement.
• In Australia, the Professional Footballers Association in its Retired and Transitioned Players Report of 2015, finds that 12% of retired players are unsatisfied with their current financial situation, 18,8% report that football had a negative financial impact on them and 1 out of 3, report that they had made decisions that negatively affected their financial position.
Reasons behind Athletes’ financial failure
The statistics show that the financial vulnerability of athletes is a global problem. We have identified a number of reasons behind the financial failure of most athletes.
• Lifestyle and Gambling – The high income and celebrity recognition that athletes enjoy usually at an early age, draws them to a lifestyle of the rich and famous, living for the moment, and reveling in their fame and fortune.
• Divorce & Child Support – Divorce has a disastrous effect on the financial well-being of professional athletes, as most of them don’t even consider signing prenuptial agreements. In addition, a number of athletes have children from multiple wives and they are obliged to pay several monthly alimony and child support payments which are substantial.
• Lack of Financial Education – Career athletes often do not have the same level of financial literacy as people who take a more conventional career path. The unique financial challenges that come from life as a professional athlete, combined with the lack of financial education, usually lead to poor financial decisions which unfortunately have an adverse lifelong impact.
• Bad Investments & Misplaced Trust – Advisor improprieties and misappropriations of funds have contributed to the financial problems of professional athletes. There are a lot of shady financial predators out there and athletes make an easy target.
• Family & Friends – Athletes have a lot of external pressures from family, friends, coaches, and others who have helped them succeed, and usually seek financial rewards and returns from the athlete as recognition of their contribution to the athlete’s fame.
• Sudden Wealth – The receipt of sudden wealth is an intense emotional event, and it precipitates new financial challenges and decisions. Athletes must deal with their emotions and confront their fears that may arise from their newfound wealth.