It doesn’t matter how many touchdowns they score, fans they bring into the stadium or zeroes in their paycheck, if professional athletes don’t manage their money properly they risk ending up broke. 

All they have to do is look to the legends that came before them who are now struggling to make ends meet and have been forced to file for bankruptcy. Bernie Kosar. Mike Tyson. Curt Schilling. Allen Iverson.

“Part of the lure of being in the league is the fun of a league,” says Eugene Profit, former NFL cornerback and now  CEO of Profit Investment Management. “If you look at rap videos, going to the club, making it rain all different things, that is all part of the lifestyle and culture and because they are adults there are very few people that can just say 'stop, don’t do it this way.'”

According to Sports Illustrated, 78% of NFL players will file for bankruptcy or face financial hardships only two years after playing their last game. NBA players face a similar fate with, 60% of players going broke five years into retirement.

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The reasons for financial hardships vary, from lack of planning, over indulgence, bad investments and poor financial guidance. Or all of the above. 

“It is incumbent young [athletes] assemble a professional team around them of advisors no different than a president has a cabinet composed of very specific experts of different areas to advise,” says Doug Eldridge, managing partner at sports firm DLE Agency in Washington, D.C.

It’s a common misconception that every pro athlete takes home a hefty paycheck, but only a few on a team will earn $1 million-plus a year. “There is a perception that every professional athlete is a de facto millionaire, but that is simply not the case,” explains Eldridge. “When you start at just over $300,000 your rookie year in the NFL… and then when you overlay their applicable tax bracket and then the payouts to the other members of their management team, you can see how quickly that sum dwindles.”

To be fair, $300,000 is still a good chunk of change to take home, but poor financial planning and the nature of the sports world lead to many athletes ending up broke.

“We learn how to manage money through our mistakes, but athletes are making these mistakes during their peak income-earning time from 22-28 years old, with a lot more money than the normal 20-year-olds making $40,000 a year”

- Chris Coy, founder of Play it Coy

“Professional athletes make the majority of their income in a short period of time versus an entrepreneur or a real estate developer who earns it over their entire lifetime, so the difference is they can save over that period of an enduring income stream versus a professional athlete,” says Peter Michaels, managing director of Toh Michaels Private Wealth Management, which  manages high-net worth individuals including athletes.

Young Money

Many athletes enter the professional sports world in their early twenties, the time when most young adults are learning personal finance through trial and error of overdraft fees, bad investment ideas and unnecessary charges. But athletes are making these mistakes with far more to lose.

“We learn how to manage money through our mistakes, but athletes are making these mistakes during their peak income-earning time from 22-28 years old, with a lot more money than the normal 20-year-olds making $40,000 a year,” says Chris Coy, founder of sports management firm Play it Coy.

After signing their first contract, athletes often face new family members and friends that come out the woodwork looking for help or investing for the “next big thing.” Terrell Owens reportedly lost $2 million in a failed electric bingo investment and Schilling filed bankruptcy after his video-game company failed.

“You can’t really push too much on family issues, but on the friends’ issue I do push,” says Michaels. “We look at the client’s overall net worth and we will allocate 5-10% to alternative asset classes, including venture, but we will do the due diligence to choose the right venture and usually we like the institutional class and not just the friend who comes in with a business idea.”

Spend vs. Save: The Real Competition  

It can be hard to make any young adult start saving when retirement is more than 20 years away (just ask any baby boomer), but it’s imperative for athletes to save prudently now for the future.

“Athletes typically have six to eight years that are considered the peak of their career to make earnings that will be more than they will be able to earn for the rest of their lifetime; they can earn millions during a couple years if managed properly and they learn to live off interest and not touch the principle,” says Darren Prince, a sports and celebrity agent. 

Michaels asks his clients whether they would rather buy their retirement now, or worry about it later under the uncertainty of earnings potential. “They lack the maturity in that they don’t see far enough in advance, they still have the immortality perspective of life and the current status will continue.”

Athletes also face pressure in the locker room and society to spend big. “It’s tough to impart that type of longer-term perspective on a 22-year-old who’s still starry eyed with the amount of contract he just got signed for and then is surrounding with teammates buying expensive cars, homes and showering friends with outings,” says Michaels. “They get tired of me telling them to stop spending the money.”

Life After the Field

Raven’s linebacker Ray Lewis will play his final game in New Orleans for Super Bowl XLV after 17 years in the league. But his longevity isn’t the norm. According to Eldridge, the average NFL career is 2.5 years.

“Ray is absolutely the statistical outlier,” he says. “Very few other guys have that opportunity to say when they go. Usually it’s either injury or they simply wash out because every year with the draft, it’s bigger, stronger, faster, younger.”

Many players assume that they will stay in the sports world either through coaching, marketing their name or as a broadcast reporter. But Prince, whose clients include Dennis Rodman and Magic Johnson, warns that very few players will be able to stay in their field. 

“Now it’s not about what you can do physically and mentally or how to get the ball into the basket or get that last touchdown pass, none of that means anything anymore in the real world.”

Coy stresses to his clients that planning for life after the game has to start midway through a career. “All athletes should get a degree and take advantage of the market they are playing in while they are still playing. You can’t use your athlete platform forever, if you are in an interview and being asked what you’ve been doing for the last four years, if you say blocking or kicking, that doesn’t translate well.”

He recommends athletes use their status while still playing to get their feet in the door at local restaurants, law firms and other businesses that appeal to them so they can learn a trade and skills that will be useful in their second career.

Some experts have been calling for players associations and leagues to implement rules to help make financial planning a priority for athletes, such as forced savings, mandatory financial planning sessions and designated investment advisors. 

“At the end of the day the Dallas Cowboys are the second most valuable sports franchise in the world at $2.1 billion,” says Eldridge. "Jerry Jones is going to be OK, the Cowboys are going to be OK because they have a level of safeguard built in that makes them to some degree impenetrable, but  athletes don’t have that. The economies of scale are quite literally the David and Goliath of finances.”

Follow Kathryn on Twitter @kathrynvasel