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OT: Ex-NFL Player Bankruptcy Rate

RUinPinehurst

RUinPinehurst

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Aug 27, 2011
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Was listening to ESPN radio today around 10 am, while driving. Talk focused on an astounding item, "news" to me, that by the time they have been retired for two years, 78% of former NFL players have filed for bankruptcy. Apparently Sports Illustrated conducted a study in 2009, so this info has been around a while. But I missed it in its original release. ESPN apparently did a "30 for 30" in 2012 entitled "Broke" on this topic. This just astounds me, this stat, that nearly 8 out of 10 NFL players are going bankrupt shortly after leaving the game.
 
You can probably put a lot of these guys in the same category as lottery winners. Many come from poor financial backgrounds and have little to no financial acumen. All of a sudden they have a lot of money and, unfortunately, believe this will continue for a long, long time. Once the train loads of money stop, they are broke since their debt far exceeds their ability to pay.
 
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Heard an interview that talked a bit about this.

Some of it comes from having very little financial background/education growing up, and not really understanding basic concepts of money management - e.g. budgets, savings, investment, etc.
Some of it comes from over-extension, specifically in the form of houses for family members (carrying 2-3 large morgtages/property tax bills) and children (ongoing large expenses).
Some of it comes from not understanding things like income tax (players have to pay income tax in every state they play/work in, not just where they live).
Some of it comes from being ill-prepared during their college years for life after football, leaving them with little earning potential after their playing days are done.

It's easy to see a big windfall as a "ticket out of poverty" - but without the proper support, especially in terms of knowledge/understanding of how to manage money (which kids from poor families would just not have), backslides aren't surprising.
 
Ballerz is hysterical, but it's a comedy, not reality. Maybe it mocks reality.
The Fortune magazine article states the Bankruptcy rate of NFL players is actually under 20 %. Who knows.

http://fortune.com/2015/04/15/nfl-players-bankrupt/


Scarlet_Scourge said:
Have you seen ballers? These guys spend money like they are wealthy when in reality they will only have a rich income for 3-5 years.

It is called being stupid.
Click to expand...
Scarlet_Scourge said:
Have you seen ballers? These guys spend money like they are wealthy when in reality they will only have a rich income for 3-5 years.

It is called being stupid.
Click to expand...
 
There's also a difference between declaring for bankruptcy, being in heavy debt, being in mild/moderate debt, etc. The 15.7% bankruptcy rate is already fairly high - given that the average bankruptcy rate is less than 1% - but the bigger question is how many players who managed to have a big paycheck for a number of years ended up living right back where they started (or worse) just a few years after exiting the league.
 
it is a tough environment for these kids

looking at the following salaries by year for the Giants some guys do very well and others not so well
http://www.spotrac.com/nfl/new-york-giants/yearly/cap/

The top guys earn huge money and endorsements so they should be fine. The bottom guys ear about 300-500k.

For the big earners they may pay 10% to their agent for their football contract and 20% for endorsements. The financial advisor / accountant may get another 3-5% or more. They pay state taxes in each state they earn a paycheck. If they have a manager that person may get a few percent too. So it may be 20-30% of the salary gets funneled away to agents, managers, and advisors before another 45-50% goes to taxes.

Then they have the entourage. It can be siblings, parents, friends, and others they feel they need to support. So if the player is paying a parents mortgage and vehicle lease that can be a few thousand more a month.

Players typically need 2 residences. 1 in the city they are playing in and 1 in the town they wish to live in. Since the chance of playing for multiple teams is high you will need an apt in the city you are signed to. For a Giant or Jet that may mean $3-4k a month in rent for an apt in NYC. If a condo is being rented in NJ they may be able to get by at 2-3k a month. If they have a townhouse / house in their home town that may be another $3-4k a month for a mortgage. I am assuming they decide to live in a cheaper town then NY or NJ. maybe in Texas or Florida where they have no state income tax.

Then you have the lifestyle. Rookies tend to get hazed where they need to pay for things for veterans (ie. parties, trips, dinners, etc...). This can be thousands of dollars. If the player goes out to dinner with other players sometimes the bills get large and they probably just split the bill. It can be at a nice place like the 4 Seasons or Palms. For cars the young guys should just get a Ford Explorer type vehicle but sometimes peer pressure has them getting top of the line Audi's, BMW's, or Benz's. Also, if supporting a parent the parent may decide to get a Mercedes on their son's dime.

You also have charities the players are involved with that they will feel compelled to contribute to.

Now all young players should get themselves temporarily sterilized since every time they are with a woman unprotected there is a huge risk that the person shows up with a lawyer asking for money because of a pregnancy whether it is the player's or not.

So a journeyman player making $600k a year:
- agent 10% - 60k
- manager 5% - 30k
- Financial Advisors ./ Accountants 5% - 30k
- apt in city where playing - 40k ($3333 a month)
- mortgage in hometown - 40k ($3333 a month)
- car lease - 8k ($666 a month for a normal car)
Total so far - 208k in expenses
Taxes on remaining amount - 192k

So after taxes and regular expenses $400k of a $600k contract is gone leaving $200k

$200k is a lot of money but if spending $50-60k on a house and car for parents / siblings, supporting an entourage, and others then your 200k is gone.

Of course going out to dinner with teammates can cost a few hundred dollars each time. If you are entertaining ladies with teammates then it can be $1000 each time.

Some of these guys take nice vacations in the off season to places like Sandals, Beaches, and other high end resorts that can cost $20-50k for the trip, food, and airfare.
 
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RUChoppin said:
Heard an interview that talked a bit about this.

Some of it comes from having very little financial background/education growing up, and not really understanding basic concepts of money management - e.g. budgets, savings, investment, etc.
Some of it comes from over-extension, specifically in the form of houses for family members (carrying 2-3 large morgtages/property tax bills) and children (ongoing large expenses).
Some of it comes from not understanding things like income tax (players have to pay income tax in every state they play/work in, not just where they live).
Some of it comes from being ill-prepared during their college years for life after football, leaving them with little earning potential after their playing days are done.

It's easy to see a big windfall as a "ticket out of poverty" - but without the proper support, especially in terms of knowledge/understanding of how to manage money (which kids from poor families would just not have), backslides aren't surprising.
Click to expand...
Excellent post, because of these factors the graduation rate of Div 1 football players becomes even more important. I think some of these young men come from a "culture" that does not encourage education and once the stick of playing pro football is taken from them there is no incentive for them to carry-on. A example of this is a young man who's from the same town as me in Pennsylvania. He went to Penn State and started for Paterno but is still one class short of graduating. He didnt make it in the NFL and now tends bar, why on earth would a young man like this not finish his degree?
 
W
RUfinal4 said:
it is a tough environment for these kids

looking at the following salaries by year for the Giants some guys do very well and others not so well
http://www.spotrac.com/nfl/new-york-giants/yearly/cap/

The top guys earn huge money and endorsements so they should be fine. The bottom guys ear about 300-500k.

For the big earners they may pay 10% to their agent for their football contract and 20% for endorsements. The financial advisor / accountant may get another 3-5% or more. They pay state taxes in each state they earn a paycheck. If they have a manager that person may get a few percent too. So it may be 20-30% of the salary gets funneled away to agents, managers, and advisors before another 45-50% goes to taxes.

Then they have the entourage. It can be siblings, parents, friends, and others they feel they need to support. So if the player is paying a parents mortgage and vehicle lease that can be a few thousand more a month.

Players typically need 2 residences. 1 in the city they are playing in and 1 in the town they wish to live in. Since the chance of playing for multiple teams is high you will need an apt in the city you are signed to. For a Giant or Jet that may mean $3-4k a month in rent for an apt in NYC. If a condo is being rented in NJ they may be able to get by at 2-3k a month. If they have a townhouse / house in their home town that may be another $3-4k a month for a mortgage. I am assuming they decide to live in a cheaper town then NY or NJ. maybe in Texas or Florida where they have no state income tax.

Then you have the lifestyle. Rookies tend to get hazed where they need to pay for things for veterans (ie. parties, trips, dinners, etc...). This can be thousands of dollars. If the player goes out to dinner with other players sometimes the bills get large and they probably just split the bill. It can be at a nice place like the 4 Seasons or Palms. For cars the young guys should just get a Ford Explorer type vehicle but sometimes peer pressure has them getting top of the line Audi's, BMW's, or Benz's. Also, if supporting a parent the parent may decide to get a Mercedes on their son's dime.

You also have charities the players are involved with that they will feel compelled to contribute to.

Now all young players should get themselves temporarily sterilized since every time they are with a woman unprotected there is a huge risk that the person shows up with a lawyer asking for money because of a pregnancy whether it is the player's or not.

So a journeyman player making $600k a year:
- agent 10% - 60k
- manager 5% - 30k
- Financial Advisors ./ Accountants 5% - 30k
- apt in city where playing - 40k ($3333 a month)
- mortgage in hometown - 40k ($3333 a month)
- car lease - 8k ($666 a month for a normal car)
Total so far - 208k in expenses
Taxes on remaining amount - 192k

So after taxes and regular expenses $400k of a $600k contract is gone leaving $200k

$200k is a lot of money but if spending $50-60k on a house and car for parents / siblings, supporting an entourage, and others then your 200k is gone.

Of course going out to dinner with teammates can cost a few hundred dollars each time. If you are entertaining ladies with teammates then it can be $1000 each time.

Some of these guys take nice vacations in the off season to places like Sandals, Beaches, and other high end resorts that can cost $20-50k for the trip, food, and airfare.
Click to expand...
Wow, you really put it into perspective !!!
 
phs73rc77gsm83 said:
Interesting for sure. A different definition of what comprises the 78% vs the 15.7% but that is obviously a huge difference.
Click to expand...

Since I heard the ESPN radio conversation, I've been reading a bit on the topic. Kind of odd per the huge discrepancy in the SI study vs. some other articles. Tend to think some of the post-SI articles are NFL-backed efforts at damage control. I did read where earlier this year the league held an exercise at UM that was attended by a couple dozen young players; the focus was on financial education, specifically "franchising" as a sound vehicle for them.

Anyway, got me wondering about how RU NFL alumni fare vs. this 78% figure. Also seems like an opportunity to extend the whole FAMILY focus, to promote sound financial education wherein successful ex-NFL players can assist younger players.

Could even be a differentiator in recruiting for RU, to show parents and prospects an invaluable life-benefit beyond the playing days on the Banks.
 
It's amazing that this info is out there yet these factors are continually ignored by the media. Another thread was started over here regarding the prolific cheating going on in the SEC, the point being that alot of these schools dont care about educating their players and as a result you get financial incompetence.
 
RUChoppin said:
Heard an interview that talked a bit about this.

Some of it comes from having very little financial background/education growing up, and not really understanding basic concepts of money management - e.g. budgets, savings, investment, etc.
Some of it comes from over-extension, specifically in the form of houses for family members (carrying 2-3 large morgtages/property tax bills) and children (ongoing large expenses).
Some of it comes from not understanding things like income tax (players have to pay income tax in every state they play/work in, not just where they live).
Some of it comes from being ill-prepared during their college years for life after football, leaving them with little earning potential after their playing days are done.

It's easy to see a big windfall as a "ticket out of poverty" - but without the proper support, especially in terms of knowledge/understanding of how to manage money (which kids from poor families would just not have), backslides aren't surprising.
Click to expand...
All of these. Also - alot of it is that outside of the high profile picks, these guys actually dont make THAT much. The median NFL career earnings is probably makes less than $5 million, and the taxman and agents are probably eating up more than half.

They could live a nice middle class lifestyle without working another day in their lives in many cases if they just decided that was fine (and of course many do.) A $10 million career earnings could get you $200,000 AFTER taxes (both initial, and taxes on the dividends) a year once your career is over, which puts you up in the top 2-3% of Americans, without lifting a finger other than to check in on your broker. Even $5 million gets you enough money that you wouldnt actually have to work if you didnt want to. But you couldnt blow it, or really spend any of it.

So its a tough call. Especially for a 20 something year old. Live like a king for a few years and hope things work out in the future, or save most of it, and live like a normal person for the rest of your life without much in the way of hardship.

But I can understand it. You have been broke your whole life. Often in conditions that really most people on this board, including myself, just can't fathom. All of a sudden you get more money than you could ever really think of. Young and rich. No one in your life that really has any understanding of money, other than agents and other people on your payroll. Of course you are going to spend it and live like a king for a few years.
 
RUfinal4 said:
it is a tough environment for these kids

looking at the following salaries by year for the Giants some guys do very well and others not so well
http://www.spotrac.com/nfl/new-york-giants/yearly/cap/

The top guys earn huge money and endorsements so they should be fine. The bottom guys ear about 300-500k.

For the big earners they may pay 10% to their agent for their football contract and 20% for endorsements. The financial advisor / accountant may get another 3-5% or more. They pay state taxes in each state they earn a paycheck. If they have a manager that person may get a few percent too. So it may be 20-30% of the salary gets funneled away to agents, managers, and advisors before another 45-50% goes to taxes.

Then they have the entourage. It can be siblings, parents, friends, and others they feel they need to support. So if the player is paying a parents mortgage and vehicle lease that can be a few thousand more a month.

Players typically need 2 residences. 1 in the city they are playing in and 1 in the town they wish to live in. Since the chance of playing for multiple teams is high you will need an apt in the city you are signed to. For a Giant or Jet that may mean $3-4k a month in rent for an apt in NYC. If a condo is being rented in NJ they may be able to get by at 2-3k a month. If they have a townhouse / house in their home town that may be another $3-4k a month for a mortgage. I am assuming they decide to live in a cheaper town then NY or NJ. maybe in Texas or Florida where they have no state income tax.

Then you have the lifestyle. Rookies tend to get hazed where they need to pay for things for veterans (ie. parties, trips, dinners, etc...). This can be thousands of dollars. If the player goes out to dinner with other players sometimes the bills get large and they probably just split the bill. It can be at a nice place like the 4 Seasons or Palms. For cars the young guys should just get a Ford Explorer type vehicle but sometimes peer pressure has them getting top of the line Audi's, BMW's, or Benz's. Also, if supporting a parent the parent may decide to get a Mercedes on their son's dime.

You also have charities the players are involved with that they will feel compelled to contribute to.

Now all young players should get themselves temporarily sterilized since every time they are with a woman unprotected there is a huge risk that the person shows up with a lawyer asking for money because of a pregnancy whether it is the player's or not.

So a journeyman player making $600k a year:
- agent 10% - 60k
- manager 5% - 30k
- Financial Advisors ./ Accountants 5% - 30k
- apt in city where playing - 40k ($3333 a month)
- mortgage in hometown - 40k ($3333 a month)
- car lease - 8k ($666 a month for a normal car)
Total so far - 208k in expenses
Taxes on remaining amount - 192k

So after taxes and regular expenses $400k of a $600k contract is gone leaving $200k

$200k is a lot of money but if spending $50-60k on a house and car for parents / siblings, supporting an entourage, and others then your 200k is gone.

Of course going out to dinner with teammates can cost a few hundred dollars each time. If you are entertaining ladies with teammates then it can be $1000 each time.

Some of these guys take nice vacations in the off season to places like Sandals, Beaches, and other high end resorts that can cost $20-50k for the trip, food, and airfare.
Click to expand...

Cry me a river.
 
RUScrew85 said:
Cry me a river.
Click to expand...
RUskoolie said:
You are all leaving out the fact that these players are given several seminars by NFL personnel as to how to be "smart with your money". In the end, excuses are excuses - the responsibility falls on you.
Click to expand...
Oooh seminars. That should replace a lifetime lack of training and role models for how to properly handle money. Thats about as effective as offering seminars move in weekend on not drinking too much in college. Its a handwashing move for the NFL, not a real plan.

No one is saying the responsibility doesnt fall on them. No one is saying to bail them out. or even really feel sorry for them. Just that its not surprising given the circumstances that in fact alot of them end up broke. Chances are that if any one of us was in the same situation, we would too.
 
Since Ballers was mentioned. There is a character played by the guy who was the kid in Blind Side. He is a retired lineman. It seems he had good financial management since he was not working when the show started and had a nice house. There was mention of him being a Pro bowler. When he gets a job it is as a salesman at a Chevy dealership. Based on the story line now, he doesn't need the money and the job is to keep him busy. We will see where it goes but the guys a level down from him are the ones we are talking about. Imagine the lineman that stays in the NFL for 4-6 years and is not a regular starter. He may start 3-4 games a season over his career. That is the guy who can fall into the trap when he is cut and has no more NFL career. By age 28 his NFL career is done. What does he do now for the next 30-40 years.

If the 5 year journeyman made about $3mil over his career then he may have only saved like $500k to $1mil after taxes and other expenses. $500k savings (after taxes) is not bad as an avg person. If you equate it to a person making $125k a year in business it will allow the ex-player to go about 6-7 years off of this savings at this lifestyle amount. I am basing it for the person making $125k a year to net 75k a year after taxes.

NFL min salaries:
https://www.spotrac.com/blog/nfl-minimum-salaries-for-2015-and-the-veteran-cap-benefit-rule/
 
RUskoolie said:
You are all leaving out the fact that these players are given several seminars by NFL personnel as to how to be "smart with your money". In the end, excuses are excuses - the responsibility falls on you.
Click to expand...

Seminars, really?

I'm sure a seminar is going to erase a lifetime habits and life skills learned from living near or below the poverty line, in a great many cases.

Give a kid a 20 min talk on nutrition and the importance of eating fruits and vegetables... then give them $20 and let them loose in a candy store. Now imagine that kid hasn't been allowed to eat candy his whole life until that point, despite being bombarded with commercials and advertising for it.

The lottery analogy is an apt one. The money they're receiving comes without any real appreciation for its value. Most people who have huge incomes have either a) grown up in families with large incomes, or b) worked their way up gradually from lower to higher salaries. Athletes go from zero to massive incomes overnight - much like lottery winners. A few seminars isn't going to magically grant them a money sense that they didn't gain while growing up and didn't gain by working up through the ranks.
 
And Ryan Broyles lives on $60K per year despite having $3million in career earnings:
Too often, we learn of the money management of professional athletes through particularly grim circumstances. Whether it's legal battles, bankruptcy, or worse, the news is rarely good if we're hearing about it. On the other end of the spectrum, there's sound financial planning, and then there's what Detroit Lions receiver Ryan Broyles is doing. Broyles told ESPN that despite career earnings upwards of $3 million, he and his wife have been living off of $60,000 per year.

Broyles wanted to make sure his NFL career, however long it lasts, really did set him up for life.

"Then you know how much you can invest, how risky you can be," Broyles said, as he enters the last year of his rookie contract with no guarantee he'll make the Lions' roster. "Then, when I was hitting the same budget over three, four, five months, it was all right, this is what your budget is and I had some spending money.

"I didn't hold myself back at all on those terms. That's what I tell people when they want to start to invest, I tell them to live your life and see where you stand and then pull back. Don't pull back without even knowing."

Broyles and his wife drive Mazdas, not Mercedes, and he still has the Chevrolet Trailblazer he drove in college. During training camp, he goes with economy rental cars, and managing his portfolio has become a second life, of sorts, where he's leaned on people "wealthier than me, smarter than me" to make the most of his money. Not surprisingly, he's become a knowledgeable voice for both shttp://espn.go.com/blog/detroit-lions/post/_/id/18138/by-being-frugal-financially-early-on-ryan-broyles-believes-he-has-set-up-his-futuretudents and the NFL on how to plan for the future.

http://espn.go.com/blog/detroit-lio...yan-broyles-believes-he-has-set-up-his-future
 
Lots of dudes in that league are uneducated and not terribly bright. It isn't a surprise they lose money through horrible investments and people taking advantage of them. Agents can act as managers in this way and really help these guys, provided they are above board. Tom Condon is really good in this way.

We are spoiled at Rutgers. Kids are leaving our school with a real education. Can't say the same for some of those factory schools.
 
I wish I made 200k after taxes as would most people on this site. We would be living extremely well but most of us are smart enough not to go insane buy stupid stuff. There is no reason to be broke if you are clearing 200k a year, I mean that is a TON of money. A lot of this is just being dumb. The same thing happens with musicians and people who win the lottery. You don't have to be an account to know that solid gold toilet seats is not a good idea for example.
 
Scarlet_Scourge said:
I wish I made 200k after taxes as would most people on this site. We would be living extremely well but most of us are smart enough not to go insane buy stupid stuff. There is no reason to be broke if you are clearing 200k a year, I mean that is a TON of money. A lot of this is just being dumb. The same thing happens with musicians and people who win the lottery. You don't have to be an account to know that solid gold toilet seats is not a good idea for example.
Click to expand...

That's for players with a $10M career. Average NFL salary is $1.9M and average career is 3.3 years. That's $6.3M, minus somewhere around 50-60% for taxes/agent fees/etc. So, let's just say $3M taken home, on average... and you're 23-24 years old. Even with just a modest home, wife, and one child, that's not "set for life" territory - you'll need to get a job using your degree (or somehow leveraging your former NFL status). And that's for someone who is very conservative in their spending, likely gained from growing up with some level of financial security.

Not saying it's not a huge windfall for these players - it absolutely is. But it is a lot like winning the lottery - it comes with a complete change in lifestyle and people coming out of the woodwork to capitalize on the player's good fortune. With no prior experience with any sort of money sense, it is no surprise when players slide back to the same financial situations their families were in before entering the league.
 
Mudge1026 said:
Excellent post, because of these factors the graduation rate of Div 1 football players becomes even more important. I think some of these young men come from a "culture" that does not encourage education and once the stick of playing pro football is taken from them there is no incentive for them to carry-on. A example of this is a young man who's from the same town as me in Pennsylvania. He went to Penn State and started for Paterno but is still one class short of graduating. He didnt make it in the NFL and now tends bar, why on earth would a young man like this not finish his degree?
Click to expand...
Because it wasn't a real degree in the first place. Why didn't the big shot alumni help this kid get a decent job? I saw one of the Cuse players homeless in Syracuse.
 
ATIOH said:
Following up on Abro's links:

One widely cited article in Sports Illustrated estimated that 78 percent of former NFL players are bankrupt or under “financial stress” within two years of retirement. It is not clear from the article where that figure came from, however, and it does not seem to match the economists’ research, which was based on more than 2,000 players who were drafted by NFL teams from 1996 to 2003. They used public court records to find bankruptcy filings. The economists found that about 2 percent of NFL players filed for bankruptcy within two years (of retirement).​

So from the data available, researchers say NFL bankruptcy rates are the exact same as the general population, when controlling for age.
Click to expand...

The 78% number is definitely high, especially with the nebulous "financial stress". Still, 2% is just counting the first two years out of the league. Extend that to 12 years (per the Fortune article above), and the bankruptcy rate rises to 15.7% - all for individuals under the age of 35, and all for individuals who at one point were making several thousand dollars per year.
 
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