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3 May 2018

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Success in the National Football League is no protection from the risk of bankruptcy. A new working paper released by the U.S. National Bureau of Economic Research found that nearly 16 per cent of NFL players drafted between 1996 and 2003 were bankrupt within 12 years of retirement. Initial bankruptcy filings tended to occur soon after players retired from the NFL and continued spending at a substantial rate through the first dozen years of retirement. The study also showed that bankruptcy rates are not affected by a player’s total earnings or career length.

Burning through wealth seems to be part of a financial pandemic that plagues a lot of top-earning athletes, especially in the NFL. They simply don’t have the financial discipline needed to save enough during their career to cover future expenses. The average NFL career starts at about age 22 and lasts just over 3 years, according to the NFL Players Association, resulting in average career earnings of about $4 million after taxes.

Vince Young

A case example is quarterback Vince Young, who earned millions during his playing years and then filed for bankruptcy at age 30 in 2014. Overspending and investing in private, illiquid investments was the stated cause. Wide receiver Terrell Owens filed for bankruptcy in 2012 after $80 million estimated earnings in his 15-season NFL career. Owens’ losses were said to result from lost jobs and opportunities, mortgage debt, back child support owed to 4 different women, a $438,000 IRS tax lien and an unscrupulous money manager. The NFL Players Association noted that Owens was among one of the 78 NFL players that lost a total of more than $42 million between 1999 and 2000 because they “trusted money to financial advisors with questionable backgrounds.”

NFL athletes consistently face two major problems. The first issue is a lack of personal financial knowledge, which results in the failure to plan beyond their short-lived career. These confident and highly competitive successful athletes who get rich young begin living without financial restraints, beyond their means. These athletes are used to being the best and think they will be the exception and not the rule in having a longer career. As such, they fail to plan for what they want to do when they retire and how much they can realistically expect to earn. They fail to consider how prevalent injuries are in this sport and how soon injuries can end their career prematurely. Many have taken on mortgages, which are more like long-term investments, but they no longer have the income to pay.

A second hard reality is that NFL athletes often cannot find the right professionals to best manage their finances and income taxes. Family and friends commonly lack the skills needed to manage the funds prudently and it is difficult to find trustworthy professionals. Often NFL players end up putting their money into private, illiquid investments such as opening a restaurant, sporting goods store or a real estate brokerage.

While the high salaries of NFL players should last a lifetime, so many get rich quickly and then lose their fortunes just as fast, usually as a result of overspending, a lack of planning and amateur or dishonest management.

Read our guide – Can I keep my house and car if I go bankrupt?

Winfred Tubbs

Winfred Tubbs, a seven-season Pro Bowler, says he owes his success to the deferred income arrangement he had through the NFL, which deferred up to half of his salary each year to a later period. These arrangements were discontinued by the NFL as it places a cap on the salaries of NFL teams and the NFL teams disagreed with this stipulation. This is unfortunate because deferred income arrangements helped players spread out their income over more tax years and enabled them to better plan their spending and investing later when they could focus best on how to manage those funds.

Regardless of how much income is earned, many people spend beyond their means and need to take personal responsibility for their own financial situation. Everyone needs basic financial literacy to prevent overspending and obtain knowledge about what kinds of experts you can trust. The best solution is to work with a professional to move forward to have financial stability again. If you have questions about filing for bankruptcy or need debt help in Toronto, contact Harris & Partners Inc. We are available in any of our ten offices in the GTA and southern Ontario for debt help. Drop in or contact us at 1-800-268-8093.