Photo found at Library of CongressIn our sports obsessed culture, we often think of professional athletes as set apart from the general public. Their ability to do something way better than everyone else creates this strange aura about them that somehow adds value to their scribbles and compels us to purchase the products that they pedal. They earn millions upon millions of dollars for doing things that parents in America pay big bucks for their children to participate in each year. An eighteen year old good at hitting a baseball can see more money come his way for signing a piece of paper than most Americans can make in their entire lifetime (source). But are athletes good at managing money of that magnitude? Can they cope with copious amounts of capital? Should they shutter when success sends them seductive spoils?
I was reading that perennial powerhouse of a publication that is the American Way, the American Airlines in-flight magazine, on some recent travels to the frozen tundra of Indiana that gave me some insight into these questions. The article followed the financial choices of one Aaron Hill, the second baseman for the Toronto Bluejays who was drafted in 2003 to the tune of a $1.675 million signing bonus. Have mercy! The article then outlined some of the major financial hurdles that professional athletes face when considering what to do with their cash, and you know what, it sounded awfully familiar. Athletes …
- … have trouble deciding where to put their funds. Large brokerage firms, banks, and even specialized for-athlete investment companies are all competing to get professional athletes to stash their cash in their accounts. They hire ex-players in an attempt to establish immediate trust and personal connection with the the athlete because they know that these types of things are important to the pro. It seems to me that the general public seems to operate in a similar way. We are always interested to know where people we know and trust put their money, and more times than not we follow suit. We want to know what we’re getting into and that almost always has us going to another person, whether it is on the Internet or face to face.
- … have stories of horrible financial failures. What do Gary Coleman, Joe Louis, and Michael Jackson have in common? They all earned lots of money and lost it. They may not have killed their paychecks with Starbucks and eating out, but the temptation to over consume or risk too much has left these men doing Cash Call commercials, working as a “greeter” in Vegas, and leaving the whimsical land of Neverland. The average Joe may not be forced to leave an estate with a ferris wheel … a FERRIS WHEEL … but he might be kicked out of his home for failure to pay his mortgage or work a part-time job at a fast food restaurant to pay off some bad debts. Work is the only thing that will change your financial situation, no matter how good you are at dunking a basketball.
- … are risk takers at heart. I would absolutely love to turn $4,000 into $50,000 in one year of investing. It would be pretty risky, but boy would it be nice. I don’t because I keep convincing myself that that $4,000 is better left in our bank account because we are going to need to use it soon. I can easily imagine how I would act if $4,000 meant nothing to me because I made $1.7 million in a single year. I’d probably have $4,000 burning a whole in my pocket every week. I would be trying all types of doodads and flimflams to get more. Good thing I don’t make that much money … yet.
- … have really bad memories. Professional sports players are notorious for bragging. They seem to easily forget when they get creamed by a stupid investment but shout it out on the highest roof top when they make a smoking deal. I don’t know anybody like that. I’ve never heard anyone talk about the killing they made with this investment or the profits that they turned on that flip. I mean, that isn’t the type of thing that makes it on TV shows or anything.
- … can try and keep up with the Jones’. Since the braggers can be so vocal even though they are so misguided, it can be hard for a pro in the club house to totally tune them out and stick to their asset allocation that they have meticulously formulated with their trained professional. All the “yougottas” out there aren’t only for the poor suckers, they are for the rich suckers too.
- … suffer from being too busy (or just really dumb). Professional athletes really do work very hard at their sport. Most days the last thing I want to do when I get home from a long day at work is try and research stocks. I want to sleep, eat, or be entertained. I doubt someone who throws a football for a living is really that much different, except that he could have a massive pastry from which a little person jumps out delivered to his house everyday if he really wanted to. I’m not sure how fun it would be, but Peter the Great seemed to get a kick out of it.
As you can see, pros suffer from some of the same financial problems that we Joes deal with: lack of knowledge, stupid decisions, trying to keep up with the Jones’, and the 24-hours-in-a-day syndrome. I guess being famous can’t stop you from being human.
Major league Money, Major league Issues [American Way]
My next-door-neighbor’s son-in-law is a recently retired pro baseball player. He had sense, so he never went hog wild. He knew his body would give out young due to the stresses of the sport and he’d need another business. No extravagant living or drugs ‘n’ hookers.
In fact, a couple years ago, he thought his house was too big, and the monthly operating costs were too high–silly to be that wasteful (even though he could afford it)! So they downsized to a smaller (but still high-end) house. The neighborhood is snugglier and there are more kids for his kids to play with. When you live on a huge estate on a huge tract of land, your kids are lonely!
He’s just a really nice, down-to-earth, level-headed guy, a Christian, a family man, a sensible guy.
Just the opposite of Britney Spears. Remember the recent news about her monthly budget–hundreds of thousands of dollars and NO SAVINGS OR INVESTMENTS! Which is sad because her career is pretty much over. She’ll be destitute before long–if she’s not dead from drug overdose or suicide.
I think I first realized just how much a sports player made when one of my brother’s teammates got drafted into MLB. He went out and bought his parents a house. I remember thinking as an eighth grader that that was a whole lot of money!