Wednesday 19th of December 2018

When Athletes Go Broke

Famous former heavyweight champion Evander Holyfield is in dire straits financially. His $10 million estate is allegedly in foreclosure, one of the mothers of his children is suing for unpaid child support, and his landscaping company is also suing him for $500,000 of unpaid bills. Clearly, the champ is in trouble, but how? This is a man who amassed just under $250 million in ring purses during his career. Where did it all go? Unfortunately, Evander is not alone.

Athletes and their money quickly parting is nothing new. In this post, we’ll give some cautionary tales of athletes and their financial mismanagement and explore some of the reasons why sports stars can’t seem to maintain their wealth.

All-Stars Who Lost It All

Certainly one of the most-publicized cases of an all-star going broke was the downfall of boxer Mike Tyson. His bankruptcy happened in spite of the fact that he made hundreds of millions of dollars during his career. In his petition for bankruptcy, he stated that he was no longer able to pay his bills. His liabilities totaled close to $30 million. Similarly, baseball player Jack “The Ripper” Clark filed for bankruptcy in the second year of his three-year, $8.7 million contract with the Red Sox. Jack was the epitome of financial stupidity—he lost $1 million in a drag-racing venture, owed $400,000 in back taxes, and owned over 18 vehicles, 17 of which he still owed money on.

What Goes Wrong?

Most of these financially troubled athletes were multi-millionaires at one point, so what goes so terribly wrong? In the first place, the novice mistakes that athletes make are not unique to sports; it’s just that their financial missteps get a lot more publicity than those of regular folks. So, in many cases, athletes make many of the same bad decisions and misjudgments that lead millions of regular people into bankruptcy each year. Jordan Woy, a respected and experienced sports agent, also offers the following reasons for why athletes go broke so often:

  1. They are ill-equipped to manage money astutely. Just like lottery winners, athletes often come into money quickly without any of the skills and knowledge it takes to manage it properly. When you don’t earn the money through years of disciplined business practices, it’s easy to burn through it at a breakneck pace.
  2. Lavish spending. Athletes often come from modest backgrounds, and they tend to want to enjoy the refreshing change of going from rags to riches by spending profligately. Cars, jewelry, over-the-top homes, etc. are all mainstays of the all-star lifestyle.
  3. Short career shelf-lives. If they are fortunate, most athletes will have a shelf-life of about four to ten years. They might be able to keep up with taxes and agent fees while also spending like drunken sailors while they’re pulling in big money, but that era quickly comes to a close. Once the high-dollar contracts are gone, usually so is the money.