Monday, June 9, 2008

"Why Athletes Go Broke"

Brian Cuban has a good post that is a reminder to everyone on how important it is to manage your finances well... or at least the basics. One term that professional athletes should learn from the startup world is "burnrate." They should find out what their monthly burnrate is and be aware if it's high and continues for a long period of time they will run out of money. Buy watches for friends every month? Bags for hoochies? Extraneous luxury goods adding up to a $50,000 a month is an obvious no-no.

One number that stood out in Brian's post was:

When the Toronto Star ran an article alleging that a shocking 60 percent of NBA athletes “go broke” five years after retiring, did we not all pull out that very tiny violin we have reserved for such occasions? The NBA players union and the NBA have both disputed that assertion.

Whether this is true or not, I assume it's still a large percentage which is sad. I know the bankruptcy rate of lottery winners are higher than 50%, but can't remember the exact percentage. All of these people are in the same environment. Instant or near instant millions without any understanding of what they are "earning" and a horde of leeches ready to latch on. A fair amount of times they seek their closest family members or friends since it's hard to trust the horde, but most of these people aren't capable to themselves to manage this new found wealth. Bad combination and bad news.

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