Professional Athletes: Risk Management

Recent articles have focused on professional athletes who have suffered financial losses of millions of dollars as a result of poor financial decisions. These athletes include professional baseball players, boxers, golfers, and boxers. Their poor financial decisions range from purchasing cars, women, tigers, to gambling addictions, to making poor business investments, and even buying cars. Some athletes have been scammed by their agent, their accountant or their ex-wives. These problems can be caused by a lack in education or maturity. Whatever the reason, these issues have allowed entrepreneurs to enter the financial and risk management business.

A shocking statistic shows that 78% of NFL players become bankrupt or in financial trouble within 2 years of retiring. 60% of NBA players are bankrupt within 5 years. These athletes are aware that they have plenty and don’t think about what happens when they stop getting multi-million-dollar checks. Many of these athletes don’t know anything about finance or business. Many of them may not have taken even one class in either finance or business at college. Pro athletes may not have the time to invest in their finances. Professional athletes may not have the time or the resources to invest in their retirement plans. Raghib “Rocket”, a former football player, said that he once met with J.P. Morgan, and it was like listening to Charlie Brown’s teacher. He is intelligent, but professional athletes often find themselves in the rain after their money disappears.

While many athletes have gone bankrupt, not all of them have lost their money from living lavish lifestyles. Many have tried to plan their futures and make investments but didn’t have anyone to trust. Others tried to manage their money themselves, but they did not have the knowledge or time to properly. Some have invested in high-risk ventures that ended in failure, while others have made investments in companies that were unlikely to succeed. One player bought an invention that included an inflatable raft that could be attached to the bottom part of a couch. It allowed residents of high rainfall areas to pump the raft up and allow them, and their couches, to float in the event of flooding. If this player had known someone trustworthy in the field of risk management and financial planning, he wouldn’t have lost his money on such an absurd investment.

Athletes should only use financial/risk management companies with a solid reputation. Not Uncle Joe’s accountant at the local mall. These companies should offer workshops and consultations to help clients understand financial management and personal finance. They may be trying to control the athlete by keeping them in the dark. Each investment doesn’t have to be a homerun. Companies should do everything they can to minimize the risk.

Everybody, no matter how rich or small, needs to manage their financial risk. If each investment someone makes is high-risk and high reward, they might as well gamble at a casino. This is a problem that many athletes face, but it is opening up opportunities for risk-management entrepreneurs. The athletes need to realize that sports are businesses. They must view themselves as independent contractors and have to manage and run their business.

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