Money Management in Professional Sports: Why Do Rich Athletes Go Broke?

Written by Theressa Jabbour

Header & Thumbnail photo by Dave Adamson

Professional athletes often have very high salaries, especially when they are competing at the highest levels of sport. Whether through salary earnings or brand deals, sports such as basketball, football (soccer), American football and golf lead the figures in best paying disciplines. 

In 2023, Forbes reported that out of the 50 top earning athletes in the world, 15 were basketball players in the NBA, 12 were golfers, 10 were American football players in the NFL, 6 were football players, with auto racing, boxing and tennis having two players each, and baseball rounding out the list with one player. Portuguese football player Cristiano Ronaldo tops the list with 136m USD of total earnings last year, with former American football player Tom Brady claiming number 50 with 45.2m USD of total earnings. 

However, despite the greatness of these numbers, many professional players often find themselves in financial trouble at some point during or after their professional career. An article by Sports Illustrated in 2009 highlights the long-standing commonality of this occurrence in major sports. Within 2 years of retirement, a reported figure of 75% of NFL players find themselves in financial trouble. The numbers for NBA players are similar, with 60% of players going broke within 5 years of leaving the sport. In 2022, Fox Business reported that 78% of professional athletes lose their wealth after barely 3 years into their retirements.

Photo by Josh Appel on Unsplash

There are several reasons for this. One, is financial mismanagement. Professional athletes reach the big leagues at a relatively young age, leaving them with little to no opportunity to learn the best ways to manage their money. Some end up investing in dodgy companies or trusting the wrong financial advisors, which in extreme cases has led to bankruptcy. Two, is spending beyond their means. Many athletes feel attracted to living an extravagant lifestyle once they reach the most coveted jobs in sports. Their salaries are grand and their fame has skyrocketed, leaving them with no care in the world. Purchasing expensive items like cars and houses might seem like an attractive decision, but having a large drain on their accounts can prove unwise once the money stops flowing in. Finally three, is that professional athletic careers are usually short-lived. The average career length of an NFL player, for example, is less than 4 years. So, although the athletes are being paid millions of dollars, they have to try to live off the money they made in a few short years for the rest of their lives. Many are forced to retire early due to injuries sustained in games or from having their bodies simply give up after years of pushing past their limits. A lot of these sports are dangerous for the players, as touched upon in my previous article about Safety Standards in Sport, or require a high level of fitness that simply cannot be maintained over a lifetime. With aging bodies and a risk of injuries, athletes are forced to retire well before the average retirement age in their countries. While some may think that the amount of money they make is enough to set them up for life, read on to discover how some athletes lost their fortunes.

The Victims:

John Unitas, a former Colts quarterback, had to file for bankruptcy in 1991 after several failed investments, such as a restaurant, a bowling alley and real estate ventures. Although having played in the NFL for 18 seasons, he had debts of 3.5 million USD as a result.

Former basketball player Kareem Abdul-Jabbar played in the NBA for 20 seasons, yet found himself in financial hot water in 1980. An untrustworthy agent had mishandled Abdul-Jabbar’s taxes, investments and paycheques. 

Tony Gwynn, a former San Diego Padres MLB player, is a particularly interesting case because he filed for bankruptcy two years into a five year contract. Citing liabilities, unpaid taxes and debts, Gwynn blamed his agent for these bad financial decisions.

Mike Tyson is a particularly famous example of how rich athletes go broke. The boxer filed for bankruptcy in 2003, despite making 400 million USD from his career per fight. His overspending finally caught up to him, after having lived a lavish, partying lifestyle. He reportedly had a penchant for luxury cars, high-end houses and pet tigers, leaving him with a debt worth 23 million USD at the time of filing. Nevertheless, Tyson was able to rebuild his wealth despite the odds by taking movie roles and giving up drugs and alcohol.

Photo by Abhishek Chandra on Unsplash

The Victors:

On the other hand, many top athletes have proven that one can be successful and retain wealth after retirement. Basketball star Michael Jordan is the one to model for figuring out post-career money management. He made an estimated 94 million USD in his fifteen NBA seasons, with an additional 2.4 billion USD across his entire career through brand deals. Jordan has been sponsored by McDonalds, Coca-Cola, Gatorade, and, most famously, by Nike. This particular endorsement earned him 130 million USD in 2019. He has also invested his money wisely in multiple sports teams, such as the Charlotte Hornets, the Washington Capitals and the Washington Wizards. In 2023, his net worth was still growing, with Forbes estimating it to be around 3 billion USD. Clearly, the lesson seems to be that the diversification of income and wise investment of wealth is a great way for athletes to maintain and grow their wealth after retirement. 

Serena Williams, number forty eight on the 2023 list of highest paid athletes, is another example of proper wealth management. She made 45.3 million USD in 2023, the majority of which came from brand deals with companies such as Nike and Michelob Ultra. Since turning pro in 1995, she has made more than 470 million USD in total earnings. Her off-court investments include her firm Serena Ventures, a multimedia company, as well as a stake in the Miami Dolphins team. By managing her income smartly, Williams has ensured her financial stability for at least a while longer.

While it is unfortunate to note the number of professional athletes who go broke due to a variety of financial decisions, some athletes have proven that wise money management is certainly possible. Although short-lived careers may not be an expectation for athletes at the top of their game, the need for financial preparedness is clear throughout the decades in order for former players to live comfortably past retirement. Good decisions are the key to a successful future, and there is always hope that one can overcome any financial obstacles with the right planning. This advice can translate beyond the sports world too, and the examples of pro athletes can serve as a warning to think twice before making any important financial decisions.