What Do Athletes Do With All Their Money?

There are three sources of capital that athletes generally have an abundance of – Human, Social and Financial. It’s this last type that we’re going to discuss today. More specifically, we’re going to look at where this financial capital goes, and what exactly athletes do with all their money.

According to recent estimates reported by Statista, starting NBA players can expect to bring in about $8 million per year and the average MLB player brings in about $4 million per year, while NFL and NHL players often haul in around $3 million. 

And in the most elite categories, some of the highest-earning athletes earn upwards of $100 million per year, including substantial off-the-field income.

Of course, these (mean) numbers are a bit skewed by the top earners in each league, so take them with a grain of salt. Nevertheless, it is clear that as a professional athlete, you will have an opportunity to earn quite a bit of income. 

So, why is it that the sports industry is peppered with stories of professional athletes who went broke?

Well, a lot of this has to do with—among other factors—how each athlete chooses to spend their money.

Below we’re going to examine these choices by looking at stories of athletes who wasted their fortunes, athletes who made prudent investments, and athletes who gave back after making it in the big leagues.

Athletes Are Rich—Right?

One of the most common misconceptions among the American public is that all professional athletes are financially set for life. 

It is very easy to look at the salaries of these athletes—which can be more than 50 times the national household average income of $68,000—and conclude that finances are not something that athletes need to worry about.

But it is also important to keep in mind that the average professional athlete’s career is often concentrated in a very limited window. 

In the NFL, the average player’s career is only 3.3 years. And even among leagues where the average careers are slightly longer, like MLB and NHL, the retirement age for all professional sports leagues is less than 30 years old.

Over the course of a roughly 80-year lifespan, this can create long-term cash flow challenges, and this is before taking into consideration the extreme tax liabilities that athletes have to deal with, such as the jock tax. 

So, while the salary that comes with being a professional athlete might look great on a year-by-year basis, there are a lot of potential challenges to consider.

Ultimately, it all comes down to how athletes choose to allocate their wealth.

And with that in mind, let’s take a look at how some of the most well-known athletes have chosen to spend their earnings.

Hero to Zero: Athletes Who Wasted Their Fortune

There is no denying that a lot of the world’s most successful athletes have squandered their fortunes in various ways. If you’ve ever wanted to know what athletes do with all their money, here’s a few who didn’t use it wisely:

Vince Young

As a recipient of one of the largest rookie contracts ever given ($26 million) and one of the best college athletes of all time, Vince Young undoubtedly had a lot of potential. 

However, the scrambling QB also quickly developed a tendency to spend his earnings quite quickly—a combination of being generous but also buying Ferraris and other luxury investments without regard to his finances. 

Within seven years of being drafted, Young had a liability-to-asset ratio of at least 10:1 and eventually filed for bankruptcy.

Mike Tyson

Towards the end of his career, tiger-owning Tyson became the pinnacle of reckless spending among athletes, often spending tens of thousands of dollars in a single night.

The fact that he owed child support to multiple women and had an ongoing substance abuse problem certainly didn’t help. 

By 2003, Tyson claimed he had “no money,” though he has since made some choices (including cameo appearances in movies like The Hangover) that have helped improve his finances.

Diego Maradona

One of the best soccer players of all time—the origin of the “hand of God” goal in the 1986 World Cup—Diego Maradona had an incredible career. 

Unfortunately, he also continued avoiding taxes while playing in Italy (and elsewhere), which eventually left him with a $54 million tax bill and the need to declare bankruptcy.

Dennis Rodman

Despite his success as a key player in the Chicago Bulls ‘90s dynasty—and even an unconventional diplomat in North Korea—Dennis Rodman is one of many well-known NBA players who ended up going broke. 

There is a lot of evidence that Rodman, who contributed to six championships for the Bulls, was likely underpaid throughout his career (a separate issue). But he also made a series of poor investments and, when he took his case to court, still owed nearly $1 million in spousal and child support.

Already, it’s easy to see how many high-earning athletes end up going broke. The keys to avoiding these situations include limiting excessive expenses, planning taxes effectively, and creating a long-term financial plan. 

Choosing a qualified, independent team of wealth advisors goes a long way towards protecting athletes and their families from financial risk.

Quirky Spends: Athletes Who Made Odd Purchases

There are also plenty of athletes who haven’t gone broke but also have made some financial decisions that many people, frankly, found to be rather confusing. Here are some of the most notable examples:

Leo Messi

About five years ago, Lionel Messi—arguably the best soccer player in recent history—decided to purchase his next door neighbor’s home simply because “They were noisy.” 

Though this move, by no means, ended up bankrupting the superstar, it is a prime example of athletes exercising their wealth without a direct financial benefit.

Rollie Fingers

After a Hall of Fame career that included 3 World Series championships, the legendary Rollie Fingers began making quite a few investments—smart, right? 

Well, unfortunately for Rollie, the combination of putting his wealth into failed pistachio farms, Arabian horses, and even wind turbines ended up costing him dearly.

Allen Iverson

Despite his nickname of “The Answer,” Allen Iverson wasn’t always able to answer the questions: where can I get the highest return on my investment?

In addition to buying a multi-million mansion beyond his means, Iverson also invested heavily in rare diamonds and other jewels, which ultimately didn’t pan out.

Making the decision to invest is usually a good idea for professional athletes. After all, it is crucial to create a source of future cash flows. 

However, the simple act of investment will not always be enough. It is also important to think about future returns on investment, which is not as easy to come by as many of the more ambitious or creative athletes might assume.

Playing It Smart: Athletes Turned Investors

Despite some of the stories mentioned above, there are also quite a few athletes who have invested their wealth very wisely. Here are a few of the most notable athlete investment profiles:

Shaquille O’Neal

The 7-foot icon’s investment strategy didn’t just start recently—he was also investing throughout his lucrative NBA career. In fact, Shaq was one of the original investors in Google, recently stating, “My only regret is that I wish I would have bought more.” 

Since then, he has regularly created investments that have gained multi-million dollar returns, including partial or franchise ownership for most of the companies he represents.

Mathieu Flamini

The Frenchman had an excellent career as a midfield soccer player, but has been even more successful as an investor. Most notably, Flamini rose from millionaire to billionaire status through his partnership with GF Biochemicals, one of the world’s leading providers of petroleum alternatives.

Serena Williams

As one of the best tennis players of all time, Williams has had a considerable amount of capital to work with.

She has poured significant levels of capital into a highly-diversified portfolio that includes a wide range of investment properties.

She also frequently collaborates with other investors. According to Williams, “For me, investments are really important in terms of who are the other investors: What does their portfolio look like? Have they been successful?”

Kobe Bryant

Following an extremely successful career with the Lakers, Kobe—long-known for his commitments to precision and discipline—also had a post-playing career as a successful investor. 

For example, Kobe once made a $6 million investment in a sports drink, BodyArmor, which eventually rose to $200 million in total value.

In general, these successful investors all have a few things in common: a willingness to think about long-term value generation and a willingness to diversify their holdings.

For a Cause: Athletes Who Pay It Forward

Once an athlete has become financially successful, many often start considering how to make the world a better place. Here are a few of the athletes among the most charitable in the world:

Christiano Ronaldo

Considered among the world’s best soccer players, Ronaldo is one of the most charitable athletes in the world. 

He regularly contributes to emerging challenges, including a $5 million contribution to victims of the earthquake in Nepal and many other contributions to help orphans, AIDS victims, cancer patients, and other people suffering around the world.

Lebron James

The aptly-named “King James” might also be the king of charity. Over the past few years, Lebron has given tens of millions of dollars to improve public school systems and create other opportunities for children, particularly those living near his hometown in Akron, Ohio.

Yuna Kim

Though she is best known as an exceptional figure skater, Yuna Kim also serves as an ambassador for the United Nations. 

Over the period of just a few years, Kim gave nearly $10 million to various UN-connected foundations, which has helped make her one of the most generous Olympic athletes in the world.

How Athletes Can Maximize Their Wealth Potential

Now that we’ve looked at what athletes do with all their money, it’s clear that there are many ways that extreme wealth can be invested, donated, or squandered entirely.

If you want to make sure you don’t end up in the latter category, it’s best to get professional wealth advice from a financial team that understands your situation. 

Having an athlete-focused team that provides independent wealth advice from the start of your career will help you maximize earnings while avoiding potential financial pitfalls. 

Contact us and we can discuss strategies to help optimize your earnings and investments and set you up for long-term financial success.