Athletes and Bankruptcy
High-salary athletes are not immune to financial problems. In fact, there are lessons to be learned for younger investors from some of the more famous athlete bankruptcies.
High-salary Athletes Not Immune to Financial Problems
In addition to Michael Vick's highly publicized jail sentence, the Philadelphia Eagles quarterback also went though personal bankruptcy. Now part of Vick's NFL salary goes to creditors such as BMW Financial Services, Summertime Pool, and Dodson Pest Control. The biggest problems athletes seem to have is finding reputable financial advisors who can help them conservatively invest their money. Instead, they are beset by family members, con artists, and get-rich-quick scheme promoters who are hungry for a piece of the big professional sports contract. For example, at the time of Vick's bankruptcy, he had investments in a rental car franchise, two janitorial service operations, a horse farm, a restaurant, and the infamous pit bull operation.
Investment Advice: Slow Down
So what's some good investment advice if you are young and have money to invest? Former San Francisco 49'ers quarterback Steve Young is now a managing director at a private equity firm. His advice? Triple A bonds, one of the safest investments on the financial scene today. Basically, you loan your money to a huge financially sound corporation such as Microsoft that agrees to pay you interest. Do not expect to get rich. Bonds with durations longer than 20 years are paying not much more than 3 percent interest. But the point is they are safe investments for young wage earners who are slowly learning their way around the investment marketplace. While horse farms and restaurants may seem to offer a higher rate of return, they also offer a lot more chances for losing your investment altogether.
Buy the Mansion Later
Reggie Wilkes, another former NFL'er turned financial adviser, offers the following advice: Do not run out and buy the biggest house you can afford (or in some cases cannot afford). Buy a starter home such as a townhouse, or rent first. Take the time to learn how to live independently from college or your parents before you plunk down that down payment on a house that comes with a mortgage you might not be able to afford in the future. It could save you from a disappointing bankruptcy down the road.