Monday, June 25, 2012

Now What?: Part I

Athletes dazzle us with their incredible competitiveness, talent, and will to win.  Following a player from prospect to professional athlete to veteran provides fans with exhilarating and fulfilling memories.  During these careers, most professional athletes earn exorbitant amounts of money, placing them in the United States' top tax bracket as well as the everyday citizen's category of rich.  One question remains: "Once retired, what do athletes do with the money they made during their careers?" This three part series will explore the financial highs and lows of professional athletes after they retired from their given sport.  Part one focuses on athletes who'se retirements have been marred by financially difficulty.

Curt Schilling
Curt Schilling is in trouble.  By all standards, the former Phillies, Diamondbacks, and Red Sox pitcher needs help.  Following retirement from Major League Baseball, Schilling decided to create and run his own video game company.  He called it 38 Studios, named for his jersey number throughout his career.  From an outsiders perspective this venture seemed harmless.  A rich man who wanted to exploit the video game craze, and, more importantly, put his personal stamp on the project.  Unfortunately for Schilling, venture capitalists did not agree with Curt's optimism for the company, refusing to invest millions of dollars in the video game studio.  In response to a lack of funds, Schilling sunk about $50 million of his own into the company.  In his 18-year career, it is estimated that Schilling made just over $114 million.  

Despite putting almost 50% of his MLB earnings into 38 Studios, the company required more money for day-to-day operations.  Thus, Schilling applied for and was subsequently granted $75 million in loans from the state of Rhode Island.  The recent recession has caused strife for most state economies, but Rhode Island has been hit harder than most.  38 Studios recent filing for chapter 7 bankruptcy only deepens an already hurting state economy that, like George Foreman, cannot afford another Muhammed Ali sized punch, lest they fall to to the mat in defeat.  Schilling faces numerous other issues including an inability to pay for his employees health insurance, and failing to pay some employees' salaries.  Overall, I think it reasonable to call 38 Studios a sunk venture in need of serious help.  Schilling screwed the pooch in every way, showing his ineffectiveness as an entrepreneur, CEO, and citizen.  While Schilling could do no wrong on the mound, he did everything wrong when it came to investing his millions and running a company.  

Allen Iverson
Schilling does not constitute the only famous millionaire athlete to incur financial troubles after retiring from professional sports.  Not to pick on former Philadelphia athletes, but no conversation concerning athletes financial troubles can begin or end without including Allen Iverson.  The former 76ers MVP guard has hit rock bottom.  After securing himself as one of the greatest professional basketball players of all time, and racking up over $200 million, Iverson retired from the NBA in 2010.  During that illustrious 15-year career, Iverson supported more than 50 of his closest friends, a family, and his "thug" desires.  "The Answer", as Iverson was known during his career, owes $859,000 to a Georgia jewelry store and $2.5 million on a house in Denver, Colorado.  In addition to simple debt, Iverson's wife has filed for divorce, which could cost the broke former NBA All-Star even more money.  

So, to recap, Schilling took his riches and invested poorly, irresponsibly managed his business, and now wants help cleaning up the mess he made.  Iverson lived above his means, leaving us wondering how a millionaire could be so stupid, and faces more legal issues due to divorce.  These two former athletes shed light on a number of common problems that plague former professional athletes.  Poor investments, frivolous spending, unreasonable loyalties for friends, and familial issues lead to the most prolific falls from grace.  

What can we learn from these regrettable situation?  First, we learn that no matter how iconic and rich a person is, the ability to lose everything remains constant.  The American Dream is built upon every person striving for more and greater life pursuits.  More often than not, one of these chief goals is to attain wealth.  Professional athletes are blessed with special talents, and simultaneously work incredibly hard, thus earning themselves the title of millionaire.  Unfortunately, earning millions of dollars does not imply financial acumen or the ability to make informed and well-calculated decisions.  

So, what are the issues involved, and how can athletes help themselves to avoid financial ruin?  First, athletes need to take their educations more seriously.  Almost every NFL and NBA player attends college, but few take advantage of the gift of education.  Maybe, instead of majoring in fitness and exercise science, athletes should consider taking a few classes in economics.  This might be a smart decision, even if said athlete plans on leaving school early for the pros.  Second, finding smart, experienced, and trustworthy financial advisors to educate, instruct, and assist in investments and money management might prevent future financial collapse.  This advice only grazes the surface, and with so many professional athletes wasting their fortunes every iota is necessary.

In the second and third installments of this ongoing series, I will delve into professional athletes' successes in retirement, the future of post-athletic financial activities, and my take on the whole situation.    

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