Even our NFL "heroes" need to budget, conserve, invest wisely and diversify

The Sad Financial Future That Awaits Many NFL Players
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For our research published last year in the American Economic Review, we collected data on more than 2,000 players—all of those who were drafted by the NFL from 1996 to 2003—and followed them until 2013. We were interested in seeing how well football players do, financially, after they leave the game. Because it is very hard to find out how much they earned and spent after they retire, we looked at a simple measure of financial distress that is publicly available: bankruptcy filings. And we found that things did not go well at all. Football players, even those with short careers, usually earn more than what most college-educated workers earn during a lifetime. Because NFL careers are so short, the players’ post-NFL retirements can be long. Many get other jobs, but only a tiny percentage end up with coveted high-salary jobs such as sportscasting. After 12 years in post-NFL retirement, more than 15% of the players we followed had declared bankruptcy. We also found that bankruptcy does not depend on how much an NFL player earned in his career or how long he plays. Amazingly, higher income or longer careers seem to offer little protection against bankruptcy. These findings have been documented, with some variation, by other sources. There are numerous news stories and interviews describing instances where players have lost all the money they earned. Unfortunately, we continue to witness this phenomenon each year.

1 in 6 NFL players go bankrupt
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Studies have shown that a high percentage of NFL players declare bankruptcy after their playing days, and many others suffer financial difficulties. A Sports Illustrated (SI) article from 2009 indicated that after two years of retirement, a whopping 78 percent of former NFL players went bankrupt or suffered financial stress due to joblessness or divorce -- although in fairness, that analysis falls into the heart of the Great Recession. A recently released study by the National Bureau of Economic Research (NBER) focused on the bankruptcy aspect. The NBER working paper studied NFL players who had been drafted between 1996 and 2003. The authors found that bankruptcy filings began relatively soon after retirement and continued all the way through the first dozen post-retirement years. Taken in total, almost 16 percent of the players studied declared bankruptcy during the first twelve years of retirement. The bankruptcies did not correlate with the amount of money made over a career or the length of time in the league. Keep in mind that there are plenty of undrafted players who spend some time in the NFL (just over 31 percent in 2013 according to the Elias Sports Bureau) and most make nowhere near the money that drafted players do. Adding those players could skew the statistics either way -- the undrafted players made less money to save, yet the undrafted player may have a greater sense of how short the NFL experience can be and may be more likely to engage in financial planning. Financial planning, or more precisely the lack of it, is the main point. While the NFL Players Association (NFLPA) started a financial wellness program around the time of the SI article, too many players either do not take the advice or do not fully understand it. It is hard for an NFL athlete to fully grasp the fact that his career is short-lived and that he must plan for the future. The NBER paper points out that NFL players do not follow the "life-cycle model" of savings. In this model, people try to balance their consumption over their lifetime and save for the future, instead of simply consuming more in proportion with their current income. One could argue that most Americans do not follow that model either -- but most Americans do not get annual contracts averaging millions of dollars, especially knowing in advance that the income is short-term

Why NFL Players Are So Likely to Declare Bankruptcy
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In the opening anecdote of the Sports Illustrated story, Raghib (Rocket) Ismail, the Notre Dame superstar who played in the CFL and NFL and earned as much as $4.5 million per year, recalled how impervious he was to financial advice early on in his career. “I once had a meeting with J.P. Morgan,” he said, “and it was literally like listening to Charlie Brown’s teacher.” They get bad advice and make bad decisions. Ismail blew money on a wide range of sketchy investments, including a religious movie, a music label, and various high-risk restaurant and retail endeavors. Many players have sued their advisors after allegedly being scammed out of millions. In one suit filed in 2013, a group of 16 former and current NFL players claimed they were collectively bilked for more than $50 million based on the actions of an advisor who had allegedly invested the money in an illegal casino. “Regulated or not, shady advisors have made quite a mark on the NFL financial scene,” the authors of the 2014 book Is There Life After Football? Surviving the NFL wrote. “Before closer scrutiny was instituted, at least 78 players lost more than $42 million between 1999 and 2002 because they trusted money to agents and financial advisors with questionable backgrounds.” More recently, seven-time Pro Bowler Dwight Freeney sued Bank of America for $20 million, because a former adviser from the bank supposedly defrauded him by (illegally) wiring millions of dollars out of Freeney’s account. In another recent case, it is a former NFL player who is himself being accused of operating a sketchy investing scheme. In early April, the SEC filed a federal fraud complaint against former NFL player Will Allen and a business associate, who together allegedly ran a Ponzi scheme, using money from some investors to pay off others. The operation was supposed to be loaning money to athletes who were short of cash, but the suit claims roughly $7 million raised from investors was used instead for personal expenses of Allen and his associate. They get used to a certain lifestyle. Warren Sapp reportedly had 240 pairs of collectible sneakers, including 213 sets of Air Jordans, which wound up selling for more than $6,000 at auction. Former standout wide receiver Andre Rison famously blew $1 million on jewelry and routinely walked around clubs with tens of thousands of dollars in cash in his pockets, he recalled in the “Broke” documentary. Troubled cornerback Adam “Pacman” Jones has said that he once dropped $1 million in a single weekend in Las Vegas. Extravagant spending is ingrained in NFL culture, insiders say. “Around the locker room, players’ cars, clothes, houses and ‘bling’ are constantly scrutinized. If they’re not up to par, they’re ridiculed,” former Green Bay Packers’ George E. Koonce, Jr. and his fellow authors explained in Is There Life After Football? “Players don’t see their bills or keep track of their payments. They’re in the dark about taxes. They lose touch with their own money.” Once they retire and the millions stop flowing into their bank accounts, many players find it impossible to dramatically shift gears and adapt to life on a limited fixed income. It’s all the more difficult because they’re still relatively young and aren’t anywhere near ready to embrace the sensible, low-key, downsized lifestyle of the typical 70-year-old retiree.

How Dan Marino, Vince Young and Other Broke NFL Players Lost Their Fortunes
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Dan Marino, a former quarterback for the Miami Dolphins with a decorated NFL career, recently suffered a major financial setback after losing big in a major investment. The nine-time pro bowler and analyst with CBS’ “The NFL Today,” has accumulated millions over his career, but he lost a major portion of that money in one investment in a company called Digital Domain from which he purchased 1,575,525 shares. The company is popular for producing the famous hologram of dead rapper Tupac Shakur at the Coachella Music and Art Festival. However, the company soon after filed for bankruptcy, taking Marino’s stock with it. According to reports, the 51-year-old Marino’s investment might have resulted in a loss of $14 million.

There’s A Difference Between Broke And Bankrupt For Ex-NFL Players
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What the NFL did instead was eventually market its own study, published months after my SI article in 2009, with findings that were more pessimistic than the NBER working paper’s but more optimistic than the ones in my article. The league supplied University of Michigan researchers with an even more rarified sample of players: pension-eligible retirees, meaning those who had played a minimum of three years. The average career length among those interviewed was 7.3 seasons, far longer than the NFL average.4 “We had no way to include players with shorter careers,” one of the Michigan authors, David Weir, wrote to me in 2012, “and I would certainly agree that they would be an interesting group to know more about.” That same year, I received an email from an NFL PR person with the following results for me to chew on: “45% (age 50+) and 48% (age 30-49) of retired players said that they have at some point ‘experienced significant losses in business or financial investments.’” None of this was a direct comparison to the number cited in my article, not even close. But said PR person nevertheless included his own note, colored in bright red font: “a far cry from 78 percent.” The NFL has already convinced thousands of men to devote themselves to the pursuit of a lifestyle that is unsustainable at best and fictional at worst. Some of the enablers of this dream include, but are not limited to: the league’s financial literacy programs, which have historically failed to instill basic principles; the NFL Players Association’s certification program for financial advisers, which supposedly vetted a number of moneymen who reportedly allowed players to lose more than $300 million in recent years; and the players themselves, who are pressured to exaggerate the opulence of their existence.

16% of retired NFL players go bankrupt, a report says
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... the 15.7% figure should not lead anyone to conclude that the other 84% of NFL alums are all raking in the money and living high on the hog—many more than 15.7% struggle financially after leaving the sport, and many may go broke or get close to it. But this paper strictly measures bankruptcy filings.

Ex-NFL RB Clinton Portis files for bankruptcy amid $5M debt
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Former Denver Broncos and Washington Redskins running back Clinton Portis filed for bankruptcy last week, saying he has debts of more than $5 million that he can’t afford to pay. Portis, who earned more than $43 million over his nine-year career, listed his creditors on his bankruptcy filing. He owes the MGM Grand Hotel in Las Vegas $287,178.56, and the IRS accused him of failing to pay $401,432.18 in federal income taxes in 2006, and $57,187.61 in federal income taxes in 2010. Portis also owes $500,000 to his mother, $500,000 to “Entertainment Tonight” correspondent and former NFL sideline reporter Nischelle Turner and $412,000 in “domestic support obligations” to four different women, according to reports. Portis is one of a dozen former pro athletes and stars who invested in a now-defunct Alabama casino. Others include world champion boxer Floyd Mayweather, actor Jamie Foxx and ex-NFL wide receiver Terrell Owens.

Comments: I'm a fan, but don't regard them as heroes. For heroes see Hebrews 11! Image is screen grab from final article.