NBA players going bankrupt

Daniel Bukspan of CNBC had a piece yesterday on pro athletes who made large amounts of money and ended up declaring bankruptcy.

He put together a slide show of 15 athletes on the CNBC website with blurbs on each situation.

In the article, Bukspan mentions that the NBA players association in 2008 claimed that 60% of pro basketball players go broke before they retire. Fortunately, there is a generous pension for players who are in the league longer than 3 years.

According to this article written in 2010, a player will receive a minimum of $57k per year starting at age 62 if they play 3 years in the league. They could $195k per year if they make it to 11 years. But getting to 62 with any money is evidently uncommon for many NBA players.

I have a personal anecdote on this issue. I vacationed with my wife in Fort Lauderdale a few years ago. We went out to an early dinner at Charley's Crabs which is on the Intercoastal Waterway. An enormous yacht pulls up to the restaurant. Scottie Pippen comes out with an entourage- wife, nanny, kids, crew from the yacht. Our waiter made an unsolicited comment that the yacht was close to $50 million in "value". As if that was a good thing...

Immediately my mind started churning (financial planner by trade). I thought Pippen probably made $100 million in salary over his career (actual figure is $109 million according to this site). Perhaps he made another $100 million in endorsements. Still not enough money to afford a $50 million yacht when you consider the spendable money is closer to $100 million after taxes. Still a man earning that amount of money should not get himself into a financial bind. But sure enough Pippen's name is on the CNBC list.

What is the Proverb about sudden money? An inheritance gained quickly in the beginning will not be blessed in the end... NBA players need to look to positive role models in this area like Matt Bonner- who didn't own a car his first few years in the league and lived in a one-bedroom apartment while playing with Toronto. His coach had to get on him for not adhering to the league's dress code (threads weren't nice enough).

Brandon Jennings is another who seems to be making good decisions with money. Knowing a lockout was looming, he bought a Ford Edge while at least one teammate drives a Ferrari. He bought a condo away from the temptations of the "hot" night life district in Milwaukee.

I think the claim that 60% of pro basketball players are broke before age 62 highlights the wisdom of guys like Jared Sullinger, Perry Jones and Harrison Barnes returning to college although they would all have been lottery picks. Maturity and making sound decisions in life are more important than jumping at the first chance to "cash" out. Hopefully advisors to NBA players are warning players that the odds of running out of money without a prudent strategy are high. And hopefully players are listening.