The real reasons why NFL players go broke

[Enigma]

OMG I dont know what to think of this FoxBusiness report.

https://www.foxbusiness.com/personal-finance/nfl-players-bankrupt-personal-finance

Some of the lines that popped out at me that I really didnt agree with:
"...and when you look at it, you’re really not making as much money as you think you are.” - Jack Brewer
"athletes at the bottom making between $300,000 to $400,000. Brewer said this pay doesn’t go very far, especially for those living in more expensive states."
“If you’re living in New York, you’re bringing in 200 grand a year, you know, it’s tough to live off 200 grand a year in New York City when you’re paying $4,000 for a one-bedroom apartment,” he said.

[MandalayPA]

Brewer's NFL career was in the early 2000s, so the numbers he's quoting were right then, but not now.  The NFL league minimum for a rookie is $480,000 and has been since 2011.  Even if you play for a New York team, you don't have to live in Manhattan, considering that both New York teams play in ... New Jersey. 

 

[Gondolin]

The numbers are off but all the quotes from players are sound.

MANY NFL players come from poor backgrounds and:
A) are taken advantage of by predatory ‘advisors’
B) struggle to resist the expectation that now that they’ve ‘made it’ the rookie will both indulge in a glamorous lifestyle and support a bevy of family members.
C) struggle to plan for life after pro-sports.

That said, for every $12m/yr WR who goes broke in LA buying mansions and chasing an image, there’s a backup TE making $500k/yr living in Kansas City or Green Bay who will retire to a second career set for life with $2m in the bank. As usual, that latter player doesn’t make the news.

[HBFIRE]

They are high incomes, the problem is that most NFL players have extremely short careers, sometimes even as short as a year or two.  They often don't have any backup career, so this income has to carry them through the rest of their life.  They don't think about their finances that way as a whole is the real issue.

[2sk22]

Brewer's NFL career was in the early 2000s, so the numbers he's quoting were right then, but not now.  The NFL league minimum for a rookie is $480,000 and has been since 2011.  Even if you play for a New York team, you don't have to live in Manhattan, considering that both New York teams play in ... New Jersey.

This is absolutely true. A related incident: back in the mid 1990s when we were house hunting, we looked at a two level duplex condo in Secaucus that was owned by an NFL star (which we did not buy!). We learned from our realtor that many NFL players lived in that area due to proximity to the Meadowlands.

[js82]

The numbers are off but all the quotes from players are sound.

MANY NFL players come from poor backgrounds and:
A) are taken advantage of by predatory ‘advisors’
B) struggle to resist the expectation that now that they’ve ‘made it’ the rookie will both indulge in a glamorous lifestyle and support a bevy of family members.
C) struggle to plan for life after pro-sports.

I think C is a huge, huge HUGE factor - particularly because I suspect most players grossly misjudge the probable length of their career.  A "typical" (i.e. non-superstar) NFL career is <4 years per the NFL Players' Association.  I suspect many players don't think about/account for this brevity when they first join the league - you're one ripped tendon(or sometimes, just a couple bad games) away from becoming yesterday's news.  If you spend a lot of your first year or two's salary treating yourself/helping family, that doesn't leave much time for your average NFL player to amass a comfortable cushion for retirement.

With the high rates of injury(or simply "losing a step" and with it, your job), if they're not saving from the start a player can easily find themselves in a situation where their income stream disappears before they expect it, and they haven't saved up a ton of money.  If a player isn't saving a ton in their first couple years, the risk of being in a tough financial spot is very, very real - unless they're in the minority of players who have substantial longevity in the league.

I suspect most people would find themselves in financial trouble if they planned their retirement around significantly more working years than they actually had.  Although NFL players make more than "most people", that's the boat that many find themselves in.  Players need to be connected with advisors who help them understand that the typical professional athlete's career is both short and unpredictable - and so they need to save, save, save at the start of their career.

[Michael in ABQ]

Also, at those income levels they'll be losing a significant amount to taxes, probably 1/3 or more.

I think a lot of it boils down to the same reason lottery winners to broke after winning millions. They simply have no idea how to manage money and live way beyond their means.

[MrThatsDifferent]

Ok, you’re a pro athlete and you come from a disadvantaged background. You don’t know much about finance. You get paid and want to have the nice house, car and look after your family. You don’t realize that taxes will be huge, that you’ll have to pay state taxes in every state you play in and you’ll have to pay your agent and manager. Then, you get hurt or cut because most players are around for 1-3 years. But of course none of them think their career will be so short. Also, there degrees from college, if they actually graduated are mostly meaningless as few actually studied because that’s not why they were in school. I listened to talk by a famous player who now does financial talks for new players. It’s quite sad.

[Maenad]

And their careers start young - you hand $400K to most 22-year-olds, they're not going to be perfectly rational with it. Though I think the desire to help out family is often coming from a really good place. I have hard-working parents who sacrificed a lot and never made much money, you can bet I've offered to help them more than once, and will continue to do so.

[Metalcat]

And their careers start young - you hand $400K to most 22-year-olds, they're not going to be perfectly rational with it. Though I think the desire to help out family is often coming from a really good place. I have hard-working parents who sacrificed a lot and never made much money, you can bet I've offered to help them more than once, and will continue to do so.

They also have a lot of awful people who they think are experts giving them terrible advice.

It's really really hard at that age not to get suckered by a slick selling snake, especially when you don't yet have the capacity to understand the numbers involved at all.

I see it a lot with early 20s medical professionals who go from making nothing to hundreds of thousands. Everyone is trying to sell them something and they trust people who are supposed to be "experts".

[rothwem]

You don’t realize that taxes will be huge, that you’ll have to pay state taxes in every state you play in

Wow, I had no idea this was a thing.  So if you're a Carolina Panthers player, you have to pay Maryland taxes for the game you play in Baltimore against the Ravens?

[simonsez]

You don’t realize that taxes will be huge, that you’ll have to pay state taxes in every state you play in

Wow, I had no idea this was a thing.  So if you're a Carolina Panthers player, you have to pay Maryland taxes for the game you play in Baltimore against the Ravens?

Yes though I'm not sure how it works when one team plays a "home" game in London if they have to file foreign taxes (I imagine so?).  The whole thing of where you live with regard to state taxes is generally overstated by those yelling the loudest on the Internet about a player who didn't sign with their team but is now going to <insert expensive state in terms of state taxes>.

https://en.wikipedia.org/wiki/Jock_tax

Tennessee (no state income tax) even had something in place a few years back that charged players a flat rate per game but for some reason they had exempted the NFL.  That wasn't shady or anything. /s

[rothwem]

You don’t realize that taxes will be huge, that you’ll have to pay state taxes in every state you play in

Wow, I had no idea this was a thing.  So if you're a Carolina Panthers player, you have to pay Maryland taxes for the game you play in Baltimore against the Ravens?

Yes though I'm not sure how it works when one team plays a "home" game in London if they have to file foreign taxes (I imagine so?).  The whole thing of where you live with regard to state taxes is generally overstated by those yelling the loudest on the Internet about a player who didn't sign with their team but is now going to <insert expensive state in terms of state taxes>.

https://en.wikipedia.org/wiki/Jock_tax

Tennessee (no state income tax) even had something in place a few years back that charged players a flat rate per game but for some reason they had exempted the NFL.  That wasn't shady or anything. /s

Wow that's totally insane. 

[shackleford]

Yes though I'm not sure how it works when one team plays a "home" game in London if they have to file foreign taxes (I imagine so?). 

I suspect the double taxation agreement between UK and USA would apply here and that they wouldn't have to pay UK taxes in addition to the US taxes they are paying.  The players wouldn't be in the UK long enough to qualify as tax resident there. 

(I'm not 100% sure on this.)

[SugarMountain]

The other issue is the average career of an NFL player is only 3 years.  I think a pretty normal trajectory is:
1) Go to college for 3-4 years, probably finish with the credits of a sophomore.
2) Get drafted in late rounds and/or get signed as a free agent. 
3) Make somewhere between $500k-1MM.  Let's say $750k/year.
4) Government takes ~40%.
5) Agent takes 10%.
6) So now you net $1.1 MM over 3 years. 
7) Player doesn't think it's only going to be 3 years.
8) First thing he does is buy Mom a house.  Say $250k.
9) Second thing he does is buy a car and a wardrobe.  Probably in the $100k range.
11) So that leaves $750k over 3 years or $250k/year.
12) Hire specialized trainers.  Say a personal weight/exercise coach, a nutritionist/chef, and a position coach.  Probably at least $100k/year between those things.
13) Our guy is now down to $150k per year.  Everyone back home thinks he's rich so they're always hitting him up for money.  He's a soft touch and gives away $25k/year.
14) So he lives on $125k per year.  No big deal, once he gets off that rookie contract he'll make real money so he spends it all.

Except he doesn't.  He tweaks a hammy in that second year and never quite recovers.  He's lost half a step and gets cut after a mediocre 3rd year.  Now he's got maybe $20-40k in savings, no job skills, no college degree, no health insurance (but he does have a bunch of nagging injuries), etc.

There's a really interesting book about being a bottom tier NFL guy, and there are way more of those than super stars.  If you think about it, there are 53 guys on the roster at any given time + 6 practice squad guys.  A lot of them get swapped in and out, cut, re-signed, cut again, go to a different team, etc..

Anyway, the book is "Slow Getting Up: A story of NFL Survival from the Bottom of the Pile".

https://www.amazon.com/dp/B00LEYI4L8/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1

[Fi(re) on the Farm]

I know of a guy whose business is private banking for pro athletes. They start giving them loans the second they sign a contract. They start their careers with debt even before they step on the field.

[MrThatsDifferent]

You don’t realize that taxes will be huge, that you’ll have to pay state taxes in every state you play in

Wow, I had no idea this was a thing.  So if you're a Carolina Panthers player, you have to pay Maryland taxes for the game you play in Baltimore against the Ravens?

Yes though I'm not sure how it works when one team plays a "home" game in London if they have to file foreign taxes (I imagine so?).  The whole thing of where you live with regard to state taxes is generally overstated by those yelling the loudest on the Internet about a player who didn't sign with their team but is now going to <insert expensive state in terms of state taxes>.

https://en.wikipedia.org/wiki/Jock_tax

Tennessee (no state income tax) even had something in place a few years back that charged players a flat rate per game but for some reason they had exempted the NFL.  That wasn't shady or anything. /s

Wow that's totally insane.

And paying the accountant who has to file in each state.