I just ran across an interesting interview with former NBA player Jalen Rose. In it, he discussed how it is that pro athletes wind up going broke despite their ultra-rich contracts.
“You want to buy your mom that house, you want to buy your dad that truck, you want to have your brothers and sisters be able to pursue the dreams and careers that they often have, and use your money to do it.”
When the host asked how far these things extend beyond the immediate family, Rose responded:
“It’s everybody that you run into. Literally. You have family members that you never would have thought. You have friends with the best ideas that can make both of you rich. The only thing that the idea needs to come to life is your money.”
When asked how long it takes to learn to say no to such requests, he replied:
“You learn to say ‘no’ when you’re about to get into your second contract and you’ve already spent the first one.”
He also said:
“If you want to lose money fast, I’ll tell you three ways: record labels, restaurants, clothing lines.”
To these I would add: engaging the services of those who don’t have your best interests in mind. In fact, this is exactly what happened to NFL quarterback Vince Young, who was recently in the news for having blown through the proceeds of a guaranteed contract worth $26M in less than six years.
In case you missed the story, both his former agent and his financial planner have been accused of forging his signature and impersonating him on the phone to misappropriate his funds and to also take out loans in his name. Sad.
To be fair, these things aren’t unique to pro athletes. In fact, there are numerous stories of lottery winners who wound up going bankrupt. How? Similar things. Being overly generous with those around you, engaging the services of people who don’t have your best interests in mind, and making poor investments.
In fact, after controlling for all other factors, a study released in 2010 found that winning lottery winnings actually increase the likelihood that you’ll go bankrupt.
Beware the windfall…