Meet Michael Jordan. The most successful basketball player of all time. Despite being retired since 2003, he’s managed to continue to make millions every year as a spokesman for Hanes and the man behind the Jordan brand, a division of Nike. He’s in the process of becoming the majority owner of the Charlotte Bobcats and owns a motorcycle racing team. Needless to say he’s made a lot of money in the past, continues to make a lot of money, and is at least doing what he can to try and make even more money in the future. Maybe it was that UNC-Chapel Hill education, or the fact that he got started in professional sports before spending money became a fashion statement, but he’s more or less be smart with his money.
Meet Eddy Curry. He made $10 million this year as a player for the New-York Knicks. For you and me, $10 million is enough for a lifetime. For Eddy, it’s good for 6-12 months. He’s estimated to have made $57 million over the course of his career in the NBA, again more than enough for anyone. But Eddy has a serious spending problem. He’s defaulted on a half-million dollar loan (carrying 85% interest <– not a typo). He separately owes another $1.2 million. For a $10 million salary that should be easy to fix, if you didn’t continue to spending problems that got you there in the first place. But alas, Eddy’s issues continue. He owns 12 cars, one of which carries a $400k base price. He also pays $17,000 a month to support various friends and family, $1,000 on TV, and $30k in household expenses. This is all MONTHLY. Oh, and he has more than $200k a month in garnished wages; this could be from something like not paying taxes.
Eddy’s not unlike a company that’s struggling to get by with high expenses, but managing for the time being thanks to high levels of income; think GM a few years ago. But eventually the money stops flowing in but keeps flowing out, and you’re bailed out by the government in trouble. Curry will face this issue whenever he retires.
Curry isn’t alone. On some scale or another ever year you’ve got hundreds or thousands of athletes between the ages of 18 and 24 that go from making nothing to 6 figures or more overnight. Most of them are not like Michael Jordan. Most aren’t even fortunate enough to make enough to dig themselves out of a hole like Curry. Many of them live above their far-from-modest means and don’t last long in the league. The finish with bad injuries and no money.
Do leagues such as the NBA and MLB have a responsibility to require that these “kids” get some kind of financial education? Just as employers are required to offer health insurance and retirement plans, should the leagues and teams require some kind of financial management for these people?
I’m torn. I don’t think they should have a responsibility, but I think they still should. I’ve already accepted that wealthy people will be taken advantage of by people manipulating them and getting them to spend money they shouldn’t. If someone handed me $20 million at 18 I sure would like it if someone tried to at least get me to start off on the right foot. Part of me also says these people are adults and are capable of making their own decisions. Afterall, the more money they spend the more we have moving through the economy.
But then again part of me wants to go all socialist on their asses. If someone is awarded a $20 million contract for 5 years of work, give them 5% a year in some kind of annuity. Not a pension though, because then the team signing the paychecks would eventually start borrowing from it. This level of pay gives them more than enough to live a lavish lifestyle on, but they get accustomed to spending $1 million a year that’s better than getting accustomed to $5 million.
There are problems with this plan. Many athletes derive revenue from endorsements. So they may be on their own for those, but the annuity-like system for at least their player’s salaries could get them on the right foot.
What do you think? Let these people fend for themselves (leaning that way myself) or have some compassion for people that don’t know any better and require some kind of financial literacy program?
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
