Former NFL Player Offers Five Reasons Why Athletes Go Broke
Far too often we hear about former professional athletes for all the wrong reasons. One of the most common themes among these stories is when an athlete goes broke, either as a result from poor advice/planning or living beyond their means. Highlighted by the ESPN “30 for 30” documentary “Broke,” the financial woes of former athletes are no secret.
Don’t take it from me, take it from someone who has been a professional athlete himself and successfully transitioned to a life after the game. Highlighted in one of the most recent “My Career Change” features here on the VIKTRE Career Network, Jedidiah Collins spent several years in the NFL before becoming a successful financial advisor.
As both a current financial advisor and former professional football player, Collins has seen both sides of the coin. “The experience [playing in the NFL] has afforded me a new perspective on the situation of professional athletes and their finances,” he said. “This is NOT another tale of some 25-year-old’s lavish spending. The players change, yet the problem remains. Let’s stop pointing fingers at people and address the underlying issues.”
Each year, there are around 1,700 active NFL players. There is also a large number of NFL-hopefuls vying for a contract and an even larger number of players who did not achieve their dream. Collins offers five reasons former athletes go broke, whether they were fortunate enough to make the league, but not stick around for as long as they had hoped, or did not make it at all. Although he speaks from experience in the NFL, these five reasons apply to athletes of all sports. He goes further into depth and offers his own perspective on why athletes going broke in an article titled “5 Reasons Why Athletes Go Broke” on his personal LinkedIn page. Connect with Jedidiah here.
Breaking Personal Finance Rule #1
“Name a profession from which you can retire before age 3o and still be financially secure. There isn’t one.”
The average career length for professional athletes differ from sport to sport, but generally hovers around 4.8 years for the “Big Four” North American sports (NBA, NFL, NHL and MLB). Assuming that most players enter their respective league as a 21-22-year-old, this means that they are retiring from their first career in said sport around the age of 26. Not many people in their mid-twenties will be financially stable for the rest of their lives, especially after losing their primary source of income and likely the only one they have ever known.
According to Collins, “retirement is accepting the fact that you will begin breaking personal finance rule #1: your lifestyle exceeds your income.” With proper career planning, athletes can learn how to adjust their lifestyle and make financially-sound decisions. Failure to do so is one of the main reasons so many athletes go broke.
The Short-Term Mindset
As an athlete at any level (high school, college, professional, etc.), you are very used to an established routine. While the ability to adapt to a routine and get things done is a good thing, it can also negatively affect your financial state. In the NFL, contracts are not guaranteed, so Collins says, “your horizon never gets past next season.” For fringe players, they may very well be living from contract-to-contract, hoping for an extension or another team to take a chance on them. This short-term mindset must change if you want your money to last.
“No one wakes up at 5:45 a.m. and wins a championship. They wake up and train at that time in hopes that it will lead to a championship effort. Money is no different.”
The Education Gap
It is no secret that a great number of athletes did not finish their college education before making the leap to the professional ranks. The lack of degree can certainly hinder transitioning athletes in terms of finding a second career, but there are certainly skills and lessons learned from sports that area readily transferable to a new career. Many athletes, however, decide to spend their offseason completing their degree requirements.
A more systemic issue as it relates to education, according to Collins, is the lack of teaching young adults the nuances of personal finance and capitalism. Without proper education, athletes and non-athletes alike can be given bad financial advice and lose everything.
The problem with athletes receiving large sums of money all at once is that they have likely never had the responsibility of managing such large quantities before. Once it hits their bank account, its theirs. Collins likens this to financial windfalls of lottery winners, although they have the option of deferring compensation, which the NFL does not offer. Additionally, due to the high income, athletes are subject to high taxes. Without proper planning and management, this could come as a surprise to many athletes.
Making The Transition
One of the hardest parts about an athlete retiring is dealing with the issue of self-identity. After thinking of yourself as an athlete for as long as you can remember, once that title is removed it is likely that you feel lost. Collins is speaking from experience, as he too experienced feeling lost before linking up with a mentor, who helped him figure out his next step.
Having a post-playing career plan is key to minimize any feelings of being ‘lost.” When looking for your next career move, you will be “overqualified in life experience and underqualified in actual [professional] experience.” This is when figuring out what your passion and values outside of sports becomes crucial. The first step to figuring out your next career begins with your ability to answer the question, “”What else am I good at?”
According to Collins, “The system, the one that pushed you to be the best in one realm, has failed to prepare you for the rest of the dream.” He challenges all athletes, both current and former, to break the mold of financial instability and marvel in the fact that they are achieving/have achieved their dream. They can start looking ahead to the future by asking themselves, “How long can I make my dream last?”