The “real deal” is bankrupt.
Former heavyweight champion Evander Holyfield is playing the real life game Deal Or No Deal. It has been reported that his $10 million estate in suburban Atlanta was under foreclosure, the mother of one of his children was suing for unpaid child support, though it appears he has paid off that debt. A Utah consulting firm went to court alleging that the boxer failed to return more than half a million dollars for landscaping. Just one more high-profile athlete who has to reduce his lifestyle to the level I’ve been accused of. Why are athletes who seem to have it all often completely unable to control anything related to finances?
We all played our fiddles to death when we heard about Latrell Sprewell’s financial problems. On Halloween 2004, Sprewell, who was in the final season of a $62 million, five-year contract with the New York Knicks, said he was insulted by the Minnesota Timberwolve’s offer of a contract extension reportedly worth between $27 million and $30 million. for three seasons. Sprewell said, “I have to feed my family.” That quote became a national nickname for the public perception of athletes as greedy, out-of-touch individuals. Apparently Sprewell still can’t feed his family. His yacht was recently repossessed and his multi-million dollar mansion is about to be repossessed.
While there is a stereotype of the financially irresponsible NBA athlete, no professional sport is immune.
Let’s take a look at some financial sob stories from high-profile athletes over the years:
1. No one my age can forget Jack “The Ripper” Clark, a star player for the Boston Red Sox who filed for bankruptcy in 1992 in the middle of his second year of a three-year, $8.7 million contract with Boston. ; he listed $6.7 million in debt. Jack was a master of financial planning and prudent asset acquisition. His bankruptcy petition listed assets as 18 cars, including a 1990 Ferrari that cost $717,000 and three 1992 Mercedes Benz cars that cost between $103,000 and $143,000. He owed money on 17 of the cars and was responsible for about $400,000 in federal and state taxes. He too had lost around $1 million in a drag racing venture. It seems that Jack would have felt more at home in the NBA. You can read about it hereMike Tyson’s Bentley
2. Johnny Unitas, Hall of Fame quarterback for the Baltimore Colts, filed for bankruptcy in 1991 citing numerous failed business ventures in his petition. These failed parties included bowling alleys, land deals, and restaurants. He filed for Chapter 11 bankruptcy in 1991.
3. Mike Tyson The name speaks for itself. Mike’s bankruptcy was highly publicized. Despite earning millions during his boxing career, Mike kept it simple. His bankruptcy petition simply stated, “I can’t pay my bills.” According to federal court records, his liabilities totaled about $27 million. You can read that story here.
4. Dorothy Hamill, the women’s figure skating gold medalist at the 1976 Winter Games, filed for bankruptcy after a series of financial setbacks. Hamill said she has experienced financial setbacks as a result of poor financial investment advice and management.
These are just a few of the woe stories of many athletes. It’s not a phenomenon limited to professional sports, just ask MC Hammer. Before declaring bankruptcy, it was made public that his daily expenses far exceeded his income of $33 million. If I’m going to veer into celebrities, I certainly have to mention Kim Basinger and Michael Jackson.
When the Toronto Star published an article claiming that a shocking 60 percent of NBA athletes “broke” five years after retiring, didn’t we all pull out that tiny violin we’ve reserved for such occasions? The NBA Players Union and the NBA have disputed that claim. The article goes on to talk about all the people who are taking advantage of and “ripping off” these athletes. While I have no doubt this is true, I can also understand how such a generalization would make the NBA uncomfortable. It leaves you with the impression that 60 percent of NBA players are not only financially inept but also idiots in general. This is simply not true. While good business sense is often lacking, I find many of their mistakes to be more mistakes of trust, credibility, and lack of life experience than anything else. Smart, busy people who can afford it hire people with specific expertise to help them. This allows them to focus on their experience. Sometimes mistakes are made and poor judgment is used as to who we hire and who we date. That’s not exclusive to the NBA or professional sports. This happens to everyone. That’s life. Happens all the time. It just doesn’t make the front page when we’re wrong. If there is any doubt as to how badly we as a general public erred, just look at the personal bankruptcy filing statistics.
To get an insider’s perspective, I contacted Jordan Woy, a highly respected sports agent and head of the sports marketing/management firm Schlegel Sports. Jordan has represented numerous high-profile athletes.
This is what Jordan said:
I think there are several reasons why so many athletes “go broke.” First, whether you’re a lottery winner, athlete, or entertainment star, if you’re not equipped with the knowledge on how to earn and save money, you’re in trouble. When they didn’t earn it through disciplined business practices and don’t have those skills, they usually do it quickly. Most of the lottery winners or athletes win a lot of money in a short period of time. They start spending it on things that only go down in value (cars, jewelry, parties, entourage, etc.) and start evaporating the money they have. They can continue with this until they stop making a lot of money. This is when the problem starts. It’s hard to believe that MC Hammer, Mike Tyson, Evander Holyfield and now Ed McMahon are broke. These are people who made hundreds of millions over time and disappeared. Lavish spending and entourages were probably the undoing of the first three.
Most athletes play for four to ten years if they are lucky. After paying taxes (can be 40-50%) and agent fees and buying their first homes, cars, outfits, jewelry (plus cars, clothing, and jewelry for friends and family), they are left with very little. When they first “strike it rich,” all their old friends and family expect help. Most athletes feel compelled to help everyone at first and then find out. They also want to keep up with their teammates. If someone buys a Bentley, he has to buy one; If someone buys a $75,000 watch, they have to buy one to maintain the appearance. Then, of course, when the race is over and you’re still living in a multi-million dollar house, driving 3 expensive cars (and insurance), riding private planes, and taking limousines when you go out on the town, reality sets in. Money dries up very fast.
However, if athletes educate themselves, learn money management skills, and make smart and safe investments along the way, they’re generally in pretty good shape. After representing athletes for over 20 years, we call this our “life plan.” We take clients on off-season work vacations to places like Las Vegas, Cancun and on a cruise to the Bahamas to learn how to network. We have people from industries like real estate, oil and gas, financial planning, credit repair, asset protection/estate planning, etc. who come to educate the players and their wives so they can learn about these businesses and also determine if they are interested in any of these industries for life after the sport. One of the financial planners who always comes here says that most people die going down Mount Everest and not going up. The goal is for these athletes to get to their Mount Everest AND get down safely.
So what do you think? Are the financial mistakes athletes make different from your mistakes or mine? Without a doubt, they are mistakes made with a greater disadvantage. When we hear these stories, are we not able to understand that someone could have so much money and spend it all? Can we learn lessons about how to live our lives from their highly publicized financial mistakes? Do we care at all?
With all due respect to Latrell Sprewell, we have families of our own to feed…
