Ever wonder why, according to Sports Illustrated, nearly 80% of former NFL players go broke within three years of leaving the league?
Not to mention other high net worth people like successful actors or busy executives and entrepreneurs experiencing financial problems as they age.
According to superstar player agent Leigh Steinberg, there are five main reasons why many former players sink into bankruptcy, https://www.forbes.com/sites/leighsteinberg/2015/02/09/5-reasons-why-80-of-retired-nfl-players-go-broke/.
1. Poor financial planning advice
2. A large entourage demanding support and a free ride
4. Lack of understanding at how quickly a career can end (and inability to quickly adjust spending downwards afterwards)
5. Lack of preparation for a second career
Many entrepreneurs and executives as well as actors and others involved in infotainment businesses are so consumed with growing their operations or furthering their careers that they forget to pay any or much attention to their own personal (retirement) planning.
Look at the career of Raghib (Rocket) Ismail, a former NFL and CFL player, who made between $18 and $20 million in salary alone (ie, not including his side sponsorship earnings) during his playing days.
According to a March 23rd, 2009 Pablo S Torre Sports Illustrated article, How (and Why) Athletes Go Broke (https://www.si.com/vault/2009/03/23/105789480/how-and-why-athletes-go-broke ), Rocket invested in many failed ventures including:
-a “fail-proof, with no downsides”(according to one of his advisers) Rock N’ Roll Café
-a religious movie (that tanked)
-a music label called COZ Records, promoted by a guy who was “a real good talker”
-a cosmetics procedure whereby oxygen was absorbed into the skin (squashed by existing behemoth pharma players)
-a plan to create nationwide phone-card dispensers
-shops dubbed It’s in the Name, where tourists could buy framed calligraphy of names or proverbs of their choice
As founder of the NHL’s Ottawa Senators, I’ve seen countless well-paid athletes end their careers with little or nothing to show for all that training and effort.
Former NFL superstar wide receiver Terrell Owens has had a life coach for the last few years.
He says it has made a huge difference in his life and, if he had had a life coach during his playing days, it would probably have made him a better player too. Indeed, if he’d received life coaching during his playing days, he said, maybe he would still be playing now.
Everyone needs a co-active coach to help them find their way through an increasingly complex professional world and personal life.
“I don’t take responsibility for my actions, unless it’s someone else’s fault,” anonymous client
Listen to the way Terrell felt before he reached out to get himself a life coach:
“I was lost. You know—you know, being TO, being that star athlete, all the pressures, me putting a lot of pressure on myself, you know, to be the best… for me it’s been humbling. Me having to just sit, you know, sit in the house. I’ve lost friends…Because I count on one hand, you know, the friends that I can really count on and call to—and call on and really confide in, you know—you know, during my darkest times and my darkest hours,” Terrell Owens speaking with Graham Bensinger about his situation, September 9th,2013
I would add that every professional player and high net worth individual needs to not only get his other spending under control, but to have an investment program to go along with that… one that is focused on providing a predictable retirement income for life.
There is no better way, we have found, to do that than through real estate investing.
Remember, even if you have $5 million in cash in your bank account at the end of your career, invested in, for example, highly secure US treasury bills at, say, 2.76% per annum for 30 years (as of December1st, 2017, source: https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield), this is only $138,000 per year before tax.
There has to be a better way, and there is…
Here’s what we recommend:
Set aside 10% to 20% of your after-tax income each year to invest in real estate
Invest the bulk of this conservatively in residential rentals, the lowest risk real estate in most cases since… everyone needs a home
Invest in one or at most two cities, places where their economies are flourishing, supported by at least six independent engines of growth such as government, education, health care, technology, education, tourism, transportation, fulfillment, research and development, industrial production, content creation…
Put together a team of trusted advisers to buy, finance, animate, lease/rent, and manage an above-average performing real estate portfolio
Record only one name on title, which would be yours, and possibly your children or spouse; no one in your entourage, no adviser, no one else would be on title… ever
Hold all real estate in your personal name not in a corporation no matter what so-called tax advantages might be possible via incorporation—KISS or Keep it Simple or, put another way, complexity is the enemy
What is $300 million these days? Not as much as you might think.
Manny Machado’s 10-year deal with the San Diego Padres might break down this way:
US income taxes ($118,800,000)
California income taxes ($39,900,000) [the highest in the US]
yields $141,300,000 in after tax income
enough to buy about 1/2 of an avg superyacht according to Forbes, https://www.forbes.com/sites/aliciaadamczyk/2015/04/08/how-much-does-a-superyacht-really-cost/#4bf60bb336bc.
Or Manny could have bought a home at 8303 La Jolla Shores, La Jolla for $24 million in 2018; even though there is a 4,000 sq ft home on the property, it was bought for land value—the site is 4.5 acres (source: https://www.sandiegouniontribune.com/business/real-estate/sd-fi-most-expensive-homes-20181231-story.html). If Manny builds a 12,000 sq ft replacement home (for $1,000 per sq ft), he’ll spend another $12,000,000. So, Manny could buy (and build) 3.9 properties like this with his windfall…
Or Manny could get married and divorced three times giving half his wealth away each time.
Or Manny could gamble $1 million per hole whilst playing golf.
Or he could develop a series of bars/restaurants like former Sens defenceman Chris Philips did for $5.5 million–for his first Big Rig location (see: https://brucemfirestone.com/owning-a-pub-after-your-pro-sports-career-ends-makes-sense-at-least-if-you-are-former-sens-defenceman-chris-phillips/)
[Ottawa Senators defenceman Chris Phillips in game two of second round series against Pittsburgh Penguins, May 17, 2013, Consol Energy Center, Pittsburgh, PA]
Or he could have an entourage that costs him $400,000 per year like what Oscar de la Hoya spent on his 10-member group (for food, lodging, travel and appearance fees; source: https://www.wsj.com/articles/SB120787358981806577).
Or he could do what Rocket Ismail did…
Getting yourself a life coach, a business coach and a real estate investment coach then owning your own PB4L (personal business for life) and above-average performing real estate portfolio seems like a better plan for most professional athletes.
Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD
Real Estate Investment and Business coach
Century 21 Explorer Realty Inc broker
Ottawa Senators founder
-MAKING IMPOSSIBLE POSSIBLE
-FREEDOM VIA REAL ESTATE INVESTMENT AND PB4L, PERSONAL BUSINESS FOR LIFE
-FEHAJ, FOR EVERY HOME A JOB
-MAKE YOUR HOME WORK FOR YOU, INSTEAD OF YOU WORKING FOR IT
-HIGHER ROI NOT JUST FOR OWNERS AND INVESTORS, BUT FOR TENANTS, GUESTS, VISITORS, NEIGHBORHOODS, COMMUNITIES, TOWNS, VILLAGES, AND CITIES TOO
Feature image by Harvey Barrison from Massapequa, NY, USA – Barcelona_2015 10 12_0199, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=73187529
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