Why You (and NBA Players) Need a Financial Plan
In recent weeks, we’ve witnessed an obscene amount of money being dealt to NBA free agents. Dwyane Wade signed a 2-year contract with the Chicago Bulls worth $47.5 million. Not to be outdone, Kevin Durant signed a 2-year contract with the Golden State Warriors worth $54.5 million. Most of us can’t comprehend earning that kind of money. (These athletes are little economies). But what’s even more incomprehensible is the notion of these athletes losing it all. According to a Sports Illustrated report, 60% of former NBA players are bankrupt or near bankrupt within the first five years of retirement.
Take Charles Barkley. He’s doing well these days, but at one point he was flat-out broke despite earning $40 million during his career. Barkley blamed his money woes on a disreputable agent and an appetite for gambling, admitting to losing $10 million to his pastime.
After earning $100 million during his career, Vin Baker ended up training for a managerial position at Starbucks. The list goes on of former NBA superstars who are broke. Dennis Rodman. Shawn Kemp. Scottie Pippen. And Allen Iverson. During a divorce hearing, Iverson lamented to the court that he didn’t even have enough money to buy a cheeseburger! Iverson earned $200,000,000 million during his career.
Of course, the usual suspects plague these athletes: lavish expenditures on homes, yachts, private jets and exotic cars. No need to worry about LeBron James with that one, though. He drives a KIA (even to play a little professional basketball). Also, we can be certain that a lot of professional athletes are the attraction of untrustworthy people; the money’s too easy to get at. What it all comes down to, though, is a gross lack of planning. Iverson, for instance, was still spending a mind-boggling $300,000 a month after retiring.
Everyone needs a plan, even if you’re making millions during your career. It’s critical to having control over your financial future. These athletes had no plan in place after they retired. Most of them behaved as if they were still collecting millions in salaries and endorsements. A good financial plan, though, will take you from where you are today long into your retirement. It will ensure (if you stick to it) that you don’t run out of money, and a trusted financial advisor will hold you accountable to your plan.
A good financial plan gives you options. Options of how you want to live, not how you have to live. It lets you choose how you want to spend your time. I don’t think any of us want to be applying for a job at Starbucks after we’ve retired. Moreover, a good financial plan is one that you won’t outlive. It will sustain you and your lifestyle. Financial planning is ultimately about financial freedom. The freedom to choose between a cheeseburger or a steak if you’re hungry for one.
To learn more about Jeffrey Bogart, view his Paladin Registry research report.
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