7 May 2015
DROPPING THE MONEY BALL: WHY PROFESSIONAL ATHLETES GO BROKE
Philip Buchanon's book New Money: Staying Rich, is a revealing personal account that explores some of the financial burdens that so many professional athletes face when they sign massive contracts. Buchanon bravely discloses how his own mother demanded a pay-out of US$1 million for raising her son for 18 years, as well as other shocking anecdotes. Many athletes are ill-equipped to handle new money and squander small fortunes. In an exclusive interview with Conqa Sport, Buchanon discusses how he hopes his book can inspire and educate young athletes.
In 2002, the Oakland Raiders parted ways with close to US$5 million when they chose 22 year old, Phillip Buchanon as their first round pick in the NFL draft. Before he had even played a down, the young cornerback from the wrong side of the socio-economic divide in Streator, Illinois was about to become an instant millionaire.
On the field, Buchanon matched his salary with impressive performances. He was named Pepsi’s NFL Rookie of the Week two weeks in a row, making his comparatively diminutive size (5ft 11in/ 1.8m) irrelevant with a high work rate and accurate tackling. Off the field, Buchanon had everything a young man who had never tasted any real wealth could dream of. He purchased jewellery, cars, houses, and clothes. He bought his mother a home and supported friends and family members who needed assistance. He was a young man in the prime of his life and everything appeared to be perfect.
But that was just the surface. What wasn’t being spoken about openly was that Buchanon, like countless other professional athletes, was going through a nightmare that he neither anticipated nor deserved. He has finally revealed all in his book New Money: Staying Rich, a personal account of how his sudden wealth and fame brought him troubles and headaches that few outside of professional sport can relate to, the most troubling being his mother demanding US$1 million as compensation for raising her son.
“Soon after the draft, she told me that I owed her a million dollars for raising me for the past 18 years,” Buchanon divulges in his book. “The covenant of having a child is simply that you give your child everything possible and they owe you nothing beyond a normal amount of love and respect. There is no financial agreement.”
Buchanon’s story, though distressing, is by no means unique. ESPN’s 30 for 30 documentary Broke (2012), directed by Billy Corben, reveals that many professional athletes lose fortunes. As a result of pressure to help friends and family, a lack of competent financial planning advice, divorce, a lack of awareness of how rapidly a career can end, and a host of other factors, these young men and women with dollar signs in their eyes go broke before they even realise what has hit them. Many of these stories are not revealed until after the athlete has retired and bankruptcy has been declared.
“I wrote this book to show athletes that the pressures of new money are very real”, Buchanon says. “My intention was never to embarrass anyone. All I wanted to do was tell my story from my perspective and hopefully help someone make the right decisions and not fall into the same situation that I found myself in. So many athletes suffer in silence either because they feel alone or don’t want to be humiliated. I hope this book breaks that silence.”
Buchanon’s perspective on spending and wealth was dramatically altered in 2006. While playing for the Houston Texans (a team he was unhappy with as a result of the way they were coached), Buchanon was pistol-whipped and robbed in his home by men wearing ski masks. He was tied up while criminals ran off with two flat screen TVs, clothing, electronics, jewellery, and a stack of cash. They made their getaway in his SUV.
Two of the assailants were people that Buchanon grew up with. They had come from the same neighbourhood and from the same socio-economic background. Were it not for injury and various circumstances they might have been playing in the NFL alongside Buchanon. A tough lesson was learned that day.
“The old Phil died that day and a new one was born,” Buchanon says defiantly, now 34 and all too aware that something dramatic is often needed to make a dramatic change. “It brought everything into perspective. It slowed me down in terms of my lifestyle as I realised that I was privileged to be in the situation I was in. I understood that it could have been me wanting to rob a friend out of jealousy and greed. As I say in my book, “I didn’t know my dogs had rabies”. I made a decision to sort my life out right there while I was tied up in my home.”
According to Sports Illustrated, 78% of former NFL players go bankrupt only two years after retirement. Within five years of retirement an estimated 60% of former NBA players are broke. Professional athletes have very short career spans. In the NFL, the average career lasts a mere 3.5 years. This means that the vast majority of the average player’s income, immense as it is, will be made in a fraction of his adult life. Unlike other businesses with similar earnings, the well of fortune dries up very early as retirement comes at a very young age. Longevity is not guaranteed as injury and poor form can strike at any moment.
With that amount of money though, you would think it would be easy to save for the future right? Before you’re so quick to judge, ask yourself how many of us wouldn’t be seduced by the glamour of an extravagant lifestyle.
“There are definitely pressures to live up to an image as a young NFL player,” Buchanon confesses. “You see guys with big chains around their necks driving flashy cars and you want to be like them. Hip-hop glorifies certain things and all young people want to emulate what they see. The difference with athletes is that we can afford it.”
It’s understandable that when presented with a lifestyle that is so new and exciting, many young athletes take it to the extreme. American capitalist consumerism reached dizzying heights in the late ‘80s and early ‘90s, the same time that professional athlete salaries sky-rocketed and hip-hop entered the main stream. Pressures to “keep up with the Jones’” often proved too much for financially illiterate millionaires.
Internal pressures are exacerbated by external pressures. When an athlete goes pro and his bank balance swells, so too does his list of friends and family who expect handouts. “I had people close to me calling me names and making me feel bad that I wasn’t helping them,” Buchanon says. “They often used God against me and tried to manipulate me. I call them “adult abusers”. They abused my love and my trust.” In Broke, all the athletes interviewed shared similar stories. Former NFL quarterback Bernie Kosar said that “the bankruptcy stuff has been a blessing in disguise. When people don’t think you have money, they don’t call you as much. Family included.”
Often, these friends try and entice athletes into funding a business outside of sport, but not everyone can be like Magic Johnson who has built a corporate empire. 1 in 30 private equity investments work. For athletes, that number is greatly reduced as many unwisely invest their money in restaurants, bars, clubs, record labels, and oddly, car washes; businesses that are notoriously difficult to manage but are exciting and attractive. “It’s always someone’s cousin or a friend of a friend,” says Buchanon. “Everyone wants to try and get a piece.”
Athletes are fiercely competitive by nature and this machismo can lead to bad financial decisions. Ed Butowsky, an internationally recognised wealth management expert, told Sport Illustrated, “Sometimes a jock can’t shake the temptation to try and hit the jackpot.”
The divorce rate amongst athletes in the US sits between 60-80%, higher than the 53% national average and most occur once the player has retired and a change in lifestyle is needed. Many of these divorces result in gargantuan settlements like Tiger Woods’ divorce from Elin Nordegren that cost him $100 million.
Athletes also have to pay tax in every state they compete in, something no other financially comparable businessman has to do. Many athletes don’t realise that large salaries mean large tax obligations. Ignorance is never an excuse when the tax man comes knocking and can land even the wealthiest stars in trouble. Mike Tyson found himself $2 million in debt as a result of tax evasion and Lionel Messi and his father Jorge were accused last year of defrauding authorities in Spain of more than $3.4 million.
Professional athletes face financial challenges that are unique to their world. As such, there are wealth management groups and qualified advisers who specialise in assisting young athletes who are ill equipped or unwilling to learn how to handle their funds. Buchanon advises athletes to educate themselves and find advisers they can trust without putting all their funds and assets in the hands of one person.
The NFL and NFL Players Association provide assistance and encourage players to educate themselves, but it’s down to the individual. What seems to have worked best is scare tactics like Buchanon’s book and Corben’s documentary. “The hardest thing is learning how to say no. You need to know who the good people in your life are, and who are the ones that are just trying to take you for a ride,” Buchanon warns. “Players without financial stress are able to perform better and it’s their performances that got them rich in the first place. I just hope that at least one young guy picks up my book and improves his situation. That would make it all worth it.”
Philip Buchanon is a former cornerback who played 121 games in 9 years in the NFL. After being drafted by the Oakland Raiders, Buchanon went on to represent the Houston Texans, the Tampa Bay Buccaneers, the Detroit Lions, and the Washington Redskins. It is his wish that his book can educate and inspire young athletes.
New Money: Staying Rich is available here.