We hear a lot about the extravagancies of celebrity spending, and its consequences. But it's not just movie stars and musicians in the doghouse; at the end of their run, many sports stars are left with the big bills from a lavish lifestyle, and little money to pay for it. Long after their playing days are over, some athletes have started working with financial advisors to make what's left of their money last.
But smart financial decisions from the beginning would be even more beneficial. The NFL agrees, and now includes money-management tips in its yearly rookie symposium, along with the names of financial professionals.While some of the advice for millionaire athletes may not apply to the rest of the population (avoid gold-digging friends and reckless relationships that could lead to a lifetime of child support), some of it may help ordinary investors make financially wise decisions.
1) Create a budget, with room for a 'fun money' allowance, and then stick to it.
2) Avoid the 'can't-miss' investments and start-up business opportunities.
3) Plan for all possibilities, including circumstances that may leave you unable to work.
4) Start putting aside money for a rainy day.
One financial analyst offers athletes an analogy they can relate to: You don't need to hit a home run with investments. Just put your money in something secure and safe and hit for average, with singles and doubles that will pay off in the long run.
Here are three sports stars that could have used better financial advice early in their careers:
Mike Tyson -- Boxing's Undisputed Heavyweight Champion
Throughout the 80s and 90s, Mike Tyson took the world of American boxing by storm, earning over $300 million during his career in the ring.
In August 2003, after years of lavish spending, the undisputed heavyweight champion finally filed for bankruptcy. Court records show Tyson had racked up around $27 million in debt, including:
- $13.3 million owed to the IRS for taxes
- $308,749 owed to a limousine company
- $173,706 owed to a jeweler
- $382,028 owed to a law firm
- $60,603 owed to a Ferrari dealership
- $8,000 owed for his pet tigers
All in all, it is estimated that Tyson's lifestyle demanded over $400,000 a month.
Lesson Learned: Create a budget, including room for a 'fun money' allowance, and stick to it. Just because you earn in a certain income bracket doesn't mean you have to spend like you do.
Derrick Coleman -- Former NBA Superstar
This former NBA No. 1 draft pick spent more than 15 years in the league, but he's already spent every penny of his entire career earnings ($87 million).
Coleman is only the latest in a long line of athletes gone broke. The New Jersey Nets forward has a string of bad investments to his name, many of them focusing on giving back to various communities throughout the city of Detroit. And while it may have seemed like a good idea at the time, Coleman's investments in Detroit businesses and real estate have left him with a $4.7 million debt and filing for Chapter 7 Bankruptcy Protection.
In 2009, Coleman defaulted on loans related to one such struggling development, a shopping center called Coleman's Corner, located in one of Detroit's most troubled neighborhoods. Other major debts include $1.3 million owed to Comerica Bank (the result of a lawsuit) and a $1 million loan to finance property purchases in Michigan.
According to financial documents, Coleman lists assets of just over $1 million (including a Bentley convertible, five fur coats valued at $15,000 and $3,000 in jewelry -- not exactly what you would call appreciating assets) and has an estimated debt of $4.6 million due to more than 50 creditors.
Lesson Learned: Don't pour money into every start-up business you hear about, even if it's done with the best intentions.
Michael Vick -- Quarterback for Philadelphia Eagles
How the mighty fall. Once the highest-paid player in NFL history, Michael Vick should have listened to the financial advice given to fledgling professional athletes.
However, Vick's biggest mistake was handing over the financial reins. When he filed for Chapter 11 Bankruptcy Protection in July 2008, his finances were in such a state of disarray that the court had to appoint a trustee to oversee them. What the court found was a man taken advantage of by two financial advisors with histories of defrauding clients. One had even been barred from working with any firm that traded on the New York Stock Exchange, after taking more than $150,000 from two elderly widows she met while working at Wells Fargo Investments.
Like many stars, Vick had almost no idea that his money was gone until he filed for bankruptcy. According to his court-appointed trustee, Vick couldn't even fully participate in the bankruptcy case on an in-person basis.
Lesson Learned: Find a group of established and trustworthy advisors, and check in with them frequently.
