The history of pro sports is littered with tales of lost fortunes and ruined lives post-playing days. The NBA is especially rife with stories of squandered millions.
The fact that NBA players now make much more money than their predecessors ever made hasn’t stopped many players from still going broke. Michael Jordan – widely considered the GOAT NBA player – made an estimated $94 million his entire career. In today’s NBA, Golden State’s Andrew Wiggins, who has only made the All-Star game once in his nine-year career, will make that in the 3rd year of his current contract.
In discussions of NBA players who go broke, the name Antoine Walker frequently gets brought up. That’s because, despite career earnings of $108,142,015, Walker holds the distinction of having gone broke while still playing. Just one year after winning a championship with the Miami Heat, and while still playing for Minnesota, Walker filed for bankruptcy. Walker admitted that his financial troubles were largely due to awful gambling habits and legal fees after running afoul of the law.
According to Sports Illustrated, 60% of NBA players go broke within five years of retirement. The reasons for this financial downfall all boil down to a handful of common causes, including:
- Lack of financial planning.
- Excessive spending.
- Bandwagon family members and friends who come out of the woodwork asking for money once an athlete makes it to the pro levels.
- Divorce and child support.
- Buying into the myth that a career will last forever and the money made will last forever.
One of the biggest mistakes pro athletes make is spending money on things, people, and activities that don’t last. These things drain the pocketbook and leave athletes broke faster than they can imagine. The athletes who suffer the most are the ones who squander their early years’ earnings only to have their careers cut short by injury.
Lost in all this talk about athletes blowing their fortunes are the tales on the flip side – tales of athletes who could avoid the same financial problems that plagued their contemporaries.
Interestingly, the athletes who successfully navigated their post-career financial lives had similar traits – mainly that they allocated much of their earnings to investments that other ultra-high-net-worth individuals (UHNWIs) have been using for years to grow and maintain wealth. And the two asset classes preferred by successful athletes and UHNWIs have been commercial real estate and owning or investing in income-producing private businesses (i.e., private equity).
Hall-of-Famer Grant Hill is a shining example of one of these athletes who transcended financial disaster through wise financial planning and investing. After playing for Duke in college and winning a national championship with teammate Christian Laettner, Hill was drafted third overall by the Detroit Pistons in 1994. From the very start, Hill went against the grain of every other freewheeling rookie NBA player.
One of Hill’s most notable decisions was electing to forgo a sports agent to negotiate his contract and endorsement deals. Hill didn’t see any sense in paying an agent a percentage of his contracts to negotiate on his behalf. Basketball agents can charge 4%+ of a contract’s value to negotiate on an athlete’s behalf. Hill, who played for four teams throughout 19 NBA seasons, signed an eight-year $45 million rookie deal in 1994. Eschewing a sports agent who charged a commission, Hill went with an attorney who charged hourly. That attorney was Lon Babby, who had experience as the Baltimore Orioles general counsel and became Phoenix Suns president of basketball operations.
Besides bucking NBA conventions, Hill also bucked investing conventions. Instead of flocking to stocks and get-rich-quick schemes constantly presented to athletes, Hill stuck to tried and true investments. Hill says he has always been paranoid about money and that paranoia has driven his investment choices. He said he first became “paranoid about money and losing money” after watching athletes struggle with money after their careers ended. Hill’s father – former Dallas Cowboys running back Calvin Hill – played in the NFL from 1969 through 1981, so he saw some players deal with financial woes up close.
Asked about what type of investments he preferred, Hill responded, “I believe in hard assets, real assets.” Hill credits his parents for piquing his interest in commercial real estate. He made his first investment in the commercial real estate (CRE) segment in 2000, during his time with the Magic. Hill invested in multifamily units and office space buildings in central Florida, a region he described as “prime for growth, and has been growing tremendously since that time.”
Through his marketing and management company, Hill Ventures, the former NBA All-Star invested and developed over $200 million in projects throughout Florida and North Carolina. His current net worth is estimated to be around $250 million.
Athletes are just one of many high earners that can face financial difficulties due to bad financial decisions. Doctors, lawyers, and other professionals have all been known to go broke because of bad financial choices. The bad patterns mirror those of broke athletes: overspending, chasing get-rich-quick investments, and excessive debt.
If you want to build and maintain wealth:
Buck the trends like Grant Hill did and go against the grain. While everyone else chases shiny objects, stick to what’s tried and true – commercial real estate and income-producing businesses.
