
60% of all NBA players end up poor - hezekiah
http://www.cnbc.com/id/42766400/?slide=1
======
redthrowaway
Not surprising. Many of these players come from a lower class background where
financial literacy is not taught to them. They likely got through school with
the minimum of effort, protected by coaches, teachers, and administrators
because they "were good ball players". If they went to college, it was on a
basketball scholarship where their preferential treatment would continue.

In short, they've never had to think about anything besides basketball. They
go from rags to riches without anyone telling them the obvious: it won't last.
Their heroes spend big money on flashy cars and houses, and when you're
staring at a seven figure cheque that might seem like a good idea.

They likely grew up in a household where their parents lived paycheque to
paycheque, and simply being able to provide for yourself and afford luxuries
was considered being smart with your money. They probably thought of their
houses and cars as investments, because thinking of them as million dollar
wasteful extravagances is depressing. They wouldn't have made the connection
that an investment is not something that's expensive, it's something that
makes you money.

The average NBA player is raised to play basketball, and that's it. They end
up being very good at basketball, and little else. If they are amongst the
small cadre who think about life after basketball, then they likely won't be
broke. It doesn't even take any special knowledge to be able to live well off
$100M in career earnings. They just need to go to a financial adviser and have
someone else look after their money. But they don't.

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radioactive21
Not a surprise at all. I have read many stories like this and the problem is
that many of them come from poverty. They get money and they feel very guilty,
so they give money to any friends or family that asks. This is why many have
such huge entourages.

One player was paying rent for 15 of his friends. It wasn't some cheap place
either, but at high rises in a big city.

He also paid for 20 cell phone bills, on top of buying house for his parents,
brothers and sisters. Paying all the bills eating out with his close friends,
paying for rides and flights.

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jedberg
What I don't understand is why the players association doesn't do something
about it.

In theory, they could do something like this: All monies paid to players go
into a common fund, which is managed by the player's association. Each player
gets a small stipend from this fund for entertainment and housing. The rest
remains in the fund, and the player gets a statement every year showing how
much they earned from playing and how much from investing. Hopefully, after a
few years, the investing is making more than the playing, showing the player
that investing is good.

Then upon retirement, the following happens. 2 million is set aside and put
into a fund. From that fund 5% is paid every year to the player, with the rest
being reinvested. Then the rest they can choose to either remove from the
fund, or keep in the fund and get earnings payments, or maybe take some out
and leave the rest. The hope being that they saw their statements and know
that investing is good.

But even if they don't, they still get that 5%, which starts at $100K/yr and
in theory goes up with inflation, which should be more than sufficient to keep
them from being totally broke.

They could do the same for football players, who tend to have the same issue.

~~~
nh
Most NBA players are scouted from very early on (AAU), then to college for 1
year, then to NBA. They do not get a chance to learn about how to manage money
(compared to a regular joe: summer job, internship, etc..).

Most of the inner city kids have a distrust of "the system" or "the man".
Therefore, they would never trust their income to a players assoc.

Whats should be done is to establish a class on How to Manage Your Money 101
by the league/PA.

Here is a article from SI on 'How Athletes go Broke'
[http://sportsillustrated.cnn.com/vault/article/magazine/MAG1...](http://sportsillustrated.cnn.com/vault/article/magazine/MAG1153364)

~~~
Rariel
"Most NBA players are scouted from very early on (AAU), then to college for 1
year, then to NBA." This is completely untrue. Players that go to the NBA one
year out of college are the exception and not the rule.

~~~
nh
>This is completely untrue. Players that go to the NBA one year out of college
are the exception and not the rule.

This years first top 10 picks:

4 Freshman 3 Internation players (ages 18, 19, 21) 1 Sophmore 1 Junior 1
Senior

If you are any good or hyped, you are draft in the first year..

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jfruh
It's also worth remembering that a pro athlete if he's lucky has a career that
lasts 15 years, tops. Most play significantly less. Contrast that with the
average person's working life, which usually lasts 40-50 years. So sure they
make a lot per year but once they're done, they're done, since they tend not
have much by way of marketable skills. Saving and investment is the smart
thing to do, but it's also a difficult thing to tell a 21-year-old who
suddenly has more money than he's ever seen in his life.

~~~
aklein
Also, earning $10 million over 15 years is far less tax efficient than earning
that same amount over 50 years: you keep less of your income by a few marginal
tax brackets.

~~~
pbhjpbhj
> _$10 million over 15 years is far less tax efficient than earning that same
> amount over 50 years_

// Presumably you're ignoring investment even at bank base rates?

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jgmmo
This is just like the studies of lottery winners.

"Nearly one-third of lottery winners become bankrupt.

“The CFP Board made an offer to the National Association of State and
Provincial Lotteries to provide the organization's members with information to
distribute to winners. The Investment News article highlighted the lack of
financial guidance many winners receive from state lottery agencies; estimates
show that nearly one-third of lottery winners become bankrupt.” Source:
Certified Financial Planner Board of Standards, Inc <http://www.cfp-
board.org/bulletin.html>

more studies on lottery winners:
[http://answers.google.com/answers/main?cmd=threadview&id...](http://answers.google.com/answers/main?cmd=threadview&id=141224)

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vannevar
The article quotes a statement by the NBA Player's Association to that effect,
but does not substantiate it. As far as can be determined by a Google search,
no one ever corroborated the claim and since the Player's Association has a
vested interest, I wouldn't trust the assertion.

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dlikhten
Cool. Not a big surprise. Take a person who is focused on playing sports,
sports, sports, training, sports, and oh yea, training who also is poor, and
shove money in their face the thing they will do is buy everything they could.

The problem is that most people didn't get the necessary financial education.

The bigger problem is that I doubt these people are very good at math and
financial management so they probably ignored the warnings of "I need x
dollars per year to sustain this life style, if I get fired tomorrow due to
uncontrollable circumstances I am fucked". In the end lots of money needs
investing. This is a problem for the middle class and even bigger for the
upper.

~~~
streptomycin
Another large factor is that, often when athletes realize they need to
save/invest money, they get scammed in bad investment deals. A shady
businessman will hire a former athlete as a representative to sell risky
investments to current athletes, who then lose tons of money even though they
were just trying to invest their money for the future.

~~~
hezekiah
I have seen this literally - it's low down but it does happen.

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nestlequ1k
Good content, unbelievable inept slideshow implementation. Takes 5-10 seconds
to load every time you click "Next". CNBC has a really shitty web development
team.

Also, completely busted on android/iphone.

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Rariel
Maybe I'm missing it, but where is the article? All I see is a slide show
about 15 athletes that have gone broke. Google didn't return anything recent.
Can somebody reply with the link?

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AlexMuir
[http://retardzone.com/2008/09/23/abandoned-mike-tyson-
mansio...](http://retardzone.com/2008/09/23/abandoned-mike-tyson-mansion-in-
ohio/)

For an idea of where the money goes.

~~~
antidaily
One can only imagine the amount of fornicating that went on in that pool room.

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daimyoyo
I think that anyone who comes from lower to middle class backgrounds and makes
a substantial amount of money quickly faces the risk of losing it. Lottery
winners, people who receive large court judgments, and pro athletes have
consistently shown that as with most things, large amounts of money can be
easy come, easy go.BTW: The NBA player turning down a $30Million contract and
then going broke is quite funny to me.

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WettowelReactor
Does this phenomenon replicate itself in the start-up world? Curious how many
first time start-ups fail due to too much cash, to fast with no idea how to
spend it appropriately.

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protomyth
nice article on the MLB pension plan with mentions of various other leagues:
[http://www.businessinsider.com/nfl-nhl-nba-mlb-retirement-
pe...](http://www.businessinsider.com/nfl-nhl-nba-mlb-retirement-pension-
plans-lockout-2011-1)

[add link] [http://www.thestreet.com/story/10983698/1/even-pro-
athletes-...](http://www.thestreet.com/story/10983698/1/even-pro-athletes-
worry-about-retirement.html)

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jhamburger
What exactly is the definition of "broke"? Declaring bankruptcy and having
your house foreclosed doesn't mean you're broke like a homeless person is
broke.

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phamilton
A family friend of mine is Mark Madsen. After 9 NBA seasons (with 2
championships) and an average of 11 minutes per game, he entered Stanford's
MBA program. That's a pretty smart way to play. Even if he wasn't a star, he's
doing well for himself, with the future all the more promising.

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rickdale
The fault doesn't fall 100% on the athlete. Bad loans, high risk loans, were
given to these people just like the rest of America but on a much larger
scale. Yes I agree they spend lavishly, but all of them have over financed
themselves!

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nazgulnarsil
you can give a poor person money but you can't make them wealthy.

