Why Are National Football League Players Declaring Bankruptcy At High Rates?
In an astonishing new study published by the National Bureau of Economic Research, 16% of retired NFL players declare bankruptcy. This is within 12 years of retirement. That’s correct. In a study of football players drafted into the NFL between 1996 and 2003, almost 15% declared bankruptcy. This group had an average income of $1.9 million per year! And the study determined that the actual income was not a factor in bankruptcy.
It is common knowledge that football players start young and don’t generally have a long career. However, with a $420,000 minimum salary, and an average of a six-year career for those that make a team, you can figure a minimum of a $2.5 million career. At $1.9 million that number goes up quickly. And there are only a few necessary expenses for folks in their twenties, after all for these elite athletes college was paid for, and most don’t have kids or need a large home. If they saved $1 million and invested it in the simplest of bonds – the 30-year US Treasury bond at today’s rate of 2.61% – they would have $26 thousand per year as a base income, and $1 million when they “retired” in 30 years. Saving $2 million, or the average salary for one year, would double that with over $50 thousand per year income over 30 years and a $2 million retirement fund.
Of course, NFL professionals’ income peaks in those years while folks in other careers peak a decade or later (women at 39 and men at 48).
Poor Money Management Leads to Personal Bankruptcy
Very few of our clients ever averaged $1.9 million or had a minimum salary of $420,000; however, some had the same issues as the NFL players, according to the National Bureau of Economic Research: poor money management. Experts agree that many athletes fail in money management 101 because they have never been taught the skills. Not by their parents, which is typical for many young adults, and not by their coaches or agents. Another problem they have is friends. Too many. They tend to allow friends or inexperienced family members tend to their new found fortune and that often leads to mismanagement as those friends have no money management skills whatsoever, notwithstanding good intentions.
Teaching money management skills to young adults is critical, regardless of their income or careers. Saving 10% to 20% of a salary for a young adult will likely lead to good saving habits and succeeding in retirement.
How Can you Find Someone to Properly Advise You to Manage Your Money?
We don’t advise too many NFL players, but the advice to our clients would be the same to them: find someone who you know that has similar financial issues as you, similar income, and similar assets. Not the same, but the same ballpark, to use a sports metaphor. Then ask them. Then research the recommendations, check them out on their website, their linked in profile, and with any other information you can find. Check out their approach as opposed to their record.
Also, be weary of folks who call you looking for business. Their qualifications should be either attorney, who has a fiduciary responsibility, or Certified Financial Planner, who has undergone a certificate degree at an accredited institution.
Hire An Experienced Bankruptcy Attorney
If you were in the NFL and need to file for bankruptcy call us for a consultation. For the rest of you, call us for a free consultation. Bankruptcy gives folks a fresh start and retaining the services of Neil Burns, who has been representing people in bankruptcy since 1985, gives you experience. Call 617-227-7423 today.