Why do so many athletes go bankrupt?

Why do so many athletes go bankrupt?

Many Arizona football fans probably were surprised to hear about the Sports Illustrated 2009 article that reported that 78 percent of former NFL players either went bankrupt, or suffered some sort of financial challenges two years after retiring. Though it may sound shocking given the multi-million dollar contracts some professional athletes sign, the truth of the matter is that a substantial number of NFL players declare bankruptcy soon after retiring, with a more recent study by the National Bureau of Economic Research concluding that within 12 years of retiring, a whopping 16 percent of players studied declared bankruptcy.

Though Arizona residents may think their lives and finances are too different from these million dollar-earning athletes and therefore they cannot learn anything from them, the truth is that they make the same mistake that many people across the country make: they fail to plan financially.

Whether someone has been working at his or her job for a number of years, or the job is short-lived, such as an athlete's, it is often in everyone's best interest if people try to balance their consumption over their lifetime and save for the future, keeping in mind their current incomes. In addition to this, rather than investing in exciting but risky and potentially unsound business ventures such as a restaurant or car dealership, Arizona residents should consider investing in a diversified portfolio to increase their eventual gain.

Creating a financial plan is one way to budget expenses and income and try to avoid financial problems, but the best laid plans can often go awry, and unexpected life changes, such as an illness or a death in the family can cause people to become overwhelmed with debt. In these situations, debtors may want to consider filing for bankruptcy, as it allows people to wipe out most of their debt and regain their financial footing.

Source: Abc15.com, "Study: 1 in 6 NFL players go bankrupt," August 13, 2015

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