STEVE SMITH HAS A LOT TO SAY. A LOT SHOULD LISTEN:
HEY"ENTOURAGE"
STEP OFF MAN!
In an online article, Carolina Panthers standout wide
receiver, Steve Smith, discussed why he thinks millionaire athletes usually end
up in financial trouble quickly after signing lucrative contracts once they
become paid professionals. Published May 22, 2012 at NFL.com, [click to read
article] Smith discusses the pitfalls of young financially ignorant athletes
trusting the wrong people and making too many mistakes investing their money.
Smith goes on to discuss how athletes earn money just 17 weeks of the year, a
paycheck each week that they play games during the regular season. The rest of
the year, they're left to manage that money without more income replenishing
their bank accounts and without the guidance needed to budget a quantity of
money they don't understand.
Steve Smith, 33,
reflects on his career after recently signing a four-year $37.75 million deal
with the Carolina Panthers, the only NFL team he has known. The three-year
extension he signed just a month ago, includes $16.8 million guaranteed, with a
$10 million signing bonus to cushion his already bulging bank account, but
Smith said he doesn't plan to flaunt it. Steve Smith has been one of the most
productive wide receivers in the NFL and despite his modest physical stature,
5'9"; he has managed to amaze everyone during his 11 year career with his
consistency and tough-minded play. Smith is one of the few talented and
fortunate enough to stay healthy and sign additional contracts after his
initial rookie deal in 2001.
"You know, ignorance of how the financial game works or managing money doesn't exclude you because you have a lot of it. It just enables you to make bigger and dumber mistakes because you have a lot of money." - Steve Smith.
The five-time Pro
Bowler, Steve Smith, talks about the untrustworthy people surrounding athletes
with sudden spending potential, promising them of guaranteed business
opportunities and investments and can't miss opportunities that require
operating capital, that most of these financial moguls mysteriously don't seem
to ever have of their own. He talks about the people that come out of the
woodwork asking for loans, spending cash and help out of financial trouble.
These are certainly obvious things to occur once the money train rolls into
town, but what Smith didn't talk about was perhaps the biggest problem of all.
I'm not saying that I've been there, because I haven’t and Smith obviously has,
but I don't think you always have to be right in the thick of things to see
problems that are as clear as the nose on your own face. It’s the ubiquitous
player “Entourages” that always follow the money and encourage overspending,
that he didn't mention as he described the reasons pro athletes usually end up
broke and broken hearted.
Like Steve Smith, a young man growing up in Compton,
California, many of these pro athletes come from poor families, in poor
neighborhoods, often single-parent families, that don't have the financial
privilege and discretionary income to do the fun things in life that many
people take for granted; after paying bills, buying groceries, paying rent,
transportation costs and the other miscellaneous expenses that we all need,
there's not much left for luxury spending. These young men grow up thinking any
pocket cash is a lot of money. Once some of these young athletes sign a sizable
pro contract, often in millions of dollars, the feelings must be one of
enormous responsibility and uncertainty. But once that first paycheck comes in,
or that signing bonus check is cashed, there they are-- “Instant Millionaires.”
From lower-class America to Millionaires with the kind of spending potential
that most people don't see in an entire lifetime of working 9 to 5 until
retirement. But, “now what? What’s next?” they must think to themselves. Buy
Mama a new house? Buy sister the car of her dreams? Take the family to an
exotic and tropical place for vacation? Maybe pay back some creditors and swipe
the slate clean for the family? How much do I have? How much can I spend? How
much do I have to save? How long will it last? How has my life changed? These
are questions that newly wealthy young men must wonder. And as far as I know,
there is little counsel available for these men to help them preserve a life,
career and income that are far shorter than they ever expect. The average NFL
career lasts just 3 years, shorter for most. Most NFL players are playing at or
close to league minimum salary; $450,000 per year. The veteran league minimum
salary is slightly higher, but not much. For people that are used to having
hundreds of dollars, $450,000 could seem like a king’s ransom.
Most of the newly drafted or acquired young athletes
aren’t fortunate enough to remain close to home and family, and need to
relocate to the team that selected them. For the really fortunate athletes
considered higher profile players, a helicopter or perhaps a personal jet sent
by the team owner comes to whisk them away to their new team locale, and often
to the owners sprawling estate or the posh athletic centers to show off the team’s
stadiums and training facilities. Then, the wining and dining begins… Many of
the wealthy team owners like to shower their new “prize” with opulence and
privilege while they ready them to become an investment that will hopefully pay
dividends for seasons to come, filling stadiums, selling merchandise and
hopefully, helping develop huge television revenue packages for the league
owners… And of course there’s the Super Bowl hopes to talk about. The athletes
experience what most never see on television, with wide eyes and big hopes and
dreams that someday they can live the same way as the billionaire owners that
sign their paychecks. The really great players will get many millions of
dollars within the structures of their contracts and some will even get a
certain amount of guaranteed money or ridiculous signing bonuses. The rest are
dependent on incentive laden clauses throughout the legal wording of their
negotiated deal relying on performance to get the big bucks. Lawyers take care
of all that, always stoking their client and building up the expectation of big
deal contracts and all the contracts to be signed after the 1st and
the 2nd and the 3rd of their careers. After the initial
tour of the city and lavish gifts and rare opportunities, the players commune
together at the rookie minicamps, the OTA's and the preseason training camp.
During this whirlwind of activity, players will take shopping sprees together,
spending money that hasn't even settled into their bank accounts yet. Time to
spruce up the attire, shopping usually involves; Mercedes dealership, jewelry
shops, clothing stores and tattoo parlors. Next, an agent, recommended to them,
that specializes in high-end real estate. These neighborhoods are undoubtedly
in high rent districts often populated by other professional athletes and high
rollers of various disciplines of earning.
This takes me to the original subject of my article; I
call it, "Keeping up with the Jordan’s."
Michael Jordan, yes, “Thē Michael Jordan” is without a
doubt one of the most wealthy, successful athletes in the history of the world,
if not the wealthiest. After having an extremely lengthy, and successful pro basketball
career and a bevy of lucrative product endorsement deals, Jordan has amassed a
financial kingdom of personal and private investment endeavors. His fame and
his marketability set Jordan apart from any other athlete on the plane. Despite
this, MJ recreates with many other current and retired professional athletes.
None of them have the financial empire that Michael has created and therefore
none of them have this many potential, either. The problem that I'm sure he
encounters is the fact that he has a potential discretionary spending limit
that is substantially higher than perhaps anyone that he spends leisure time
with. Many of these people play golf with him, dine out with him and I presume
they shop with him and gamble as well. Rumors abound that Jordan gambles often
and his stakes are substantially higher than that of his peers. $50,000 per
hole on a round of 18 is not unusual when MJ hits the links. He also has other
expensive and extravagant tastes that he must enjoy alone, or pony up the bill
if he intends on recreating with those who have a substantially smaller
spending potential. Michael has a couple of different options as he spends his
time out with his friends and family. He can either go to the places that his
friends and family can afford, or he can go to the places he can afford and
subsidize his friends so that they can shop or dine with him. Often what
happens is a 3rd scenario; a man’s ego will often take him places
that he best off avoids. Financial incompatibility goes further than man and
woman, in fact it more often it is men with men and women with women. When
there is financial inequality among friends, the pressures to keep up with the
richer can overwhelm logic and common financial sense. Usually, it’s those
yearning for complete equality with their peers. This starts the financial
struggle for many and the beginning of a bankrupt and frustrated man. Trying to
keep up with another’s exorbitant spending habit and going broke attempting to
do it is commonplace among professional athletes that recreate together. This
is what happens on a “Jordan scale” and in every other level all the way down
to the player who has recently been cut or perhaps making league minimum in
basketball, football, baseball or even sports that pay far less to their star
athletes, like soccer or hockey or even minor-league or practice squad athletes.
Nearly every player on a professional sports team makes a different salary.
It’s just the nature of the beast. Equally talented players could make
substantially different salaries, based on timing, position played or sometimes
a player has a better agent then another and strikes a better deal than players
of equal or better ability. It just IS what it IS.
Perhaps the most toxic phenomenon among professional
athletes causing early or instant bankruptcy involves The “Entourage”.
Defined:
Entourage:
(ŏn'tʊ-räzh') noun: An entourage is an informal group or band of
people who are closely associated with a (usually) famous, notorious or
otherwise notable individual.
Now, that’s not how I would personally describe the
pro-athletes Entourage, but it is the formal definition and it fits. I would
add to that definition; “The entourage always relies on
this person of notoriety for sustenance, survival and uses their possessions
and other belongings as their own, and will not leave until the booze, drugs
and money are no longer available for their use, free.”
It’s "the
Entourage" it's "the Posse" it's "the Crew" or
whatever slang term you use to refer to it; it’s this phenomenon that gets
several of these young pro athletes in financial trouble in a big hurry.
Outspending their income level is the biggest thing that puts most of these
highly paid athletes in a financial pickle of bankruptcy early in their lives.
Even after signing multimillion dollar deals just out of college, sometimes
including large signing bonuses and guaranteed money in the millions, trouble
ensues taking millionaires and turning them into the “the bankrupt” in record
time. In Fortune magazine, an article suggested that 79% of all NFL retirees
are bankrupt within 2 years out of football. Nearly 80% of former NFL athletes
are broke within 2 years of retiring? An NFL money manager for several football
players has his own theory. He believes these athletes become penniless after
being wealthy for 3 primary reasons;
The 3 primary reasons;
1.) Investing too heavily in real estate,
2.) Investing too much, too often in private,
unproven, investment opportunities.
3.) This is the most unfortunate part of the undoing of
millionaire athletes; It's plain, simple overspending, trying to “keep up with the Jordan’s” spurred on by
the “Entourage” that takes the privileged, wealthy young talented athletes from
the penthouse to the poor house and it's usually their so-called best friends
that take them down dollar by dollar until everyone in the Entourage has had a
good time and has had nothing to lose and everything to gain from the
arrangement… until the money runs out, and so does the Entourage. “If the money
runs out, so do I.” say the Entourage. For it is in their nature to sponge off
others. It’s how you survive in the ghetto, the projects and low income housing
that many of the young athletes of today are raised in.
A lot of the athletes that have come from meager
upbringing called this notion "Keeping it real", not losing touch
with your roots, your friends, the people who were there in the beginning.
Well, I call it "keeping it stupid." There's a fundamental step that
these young men are never taught. It's a cruel reality called the “Social Class
Association Paradigm". It exists, and to deny it is just ignorant and
futile.
People who understand money:
- Know how to get money,
- Know how to make money,
- Know how to make money create more money,
- Know how to spend money, and
- Know how to make money again if they lose it.
People who have money tend to associate with other people
who also have money. This allows the social group to recreate and cohabitate
with other people who can carry their own weight financially. As long as these
newly wealthy athletes “hang” with the poor, uneducated friends that they grew
up with, poor and uneducated, they will be the ones constantly footing the bill
every time money is spent on anything above the spending potential of their
former peers. Either that or he must continue to spend money at the rate of his
friends who are not wealthy and can only afford the same lifestyle that the
athletes had before he received the money. Even then, his friends and family
will expect that the newly wealthy pick up the check for everything. After all,
now you are richer than everyone in your former circle of influence. This is
simple “cause and effect” theory that applies to practically everything that
happens in our lives. The rich are resented by the poor, unless they equally
share the wealth. Unfortunately, these theories of behavior are not taught to
these young men as their lives take instant detours toward opportunity and away
from stagnant, static lives without significant achievement. Another
all-too-familiar commonality among instantly wealthy people remaining among the
poor involves drugs, crime and irresponsibility. Steve Smith was spot on when
he mentioned that lots of money doesn’t make you smarter, you just start making
bigger mistakes with more money. One of the worst combinations on earth has got
to be “combining ignorance with wealth.” A lot of damage can be done when money
backs stupidity and immaturity.
What's worse than being poor in America? DEBT! That's my
next topic of discussion regarding athletes and the lost wealth of rare
opportunity.
"I have a theory about money and people. It is a theory of the suddenly rich and the suddenly poor… and it always involves a pack of wolves disguised as an Entourage of so-called friends."-BH
I believe that people no matter how much money they are
given or how much money is taken away, they will return to the social class
that they are educated to understand and will thrive more at a financial level
that is more familiar to them causing less stress. There is an exception to
this theory, however. The exception to this theory includes; those that are
willing to take the initiative to educate themselves to the practices,
lifestyles and habits of those who are currently living at it different
financially social level, can learn to thrive in a different social class than
they are currently programmed to understand. I do not believe it comes natural.
As I mentioned earlier in this story, newly wealthy young
men in pro sports that came from poverty, just aren't being taught how to
handle sudden wealth and the responsibilities that come along with financial
and social privilege. They’re not being educated on the short and long-term
effects from suddenly having lots of money in the bank. This is showing how bad
things can get; as these men are losing all of their wealth and going right
back to the tax bracket they were in before they signed large contracts with
professional sports franchises. However, learning to spend money takes no
training, none at all. Children can spend money in large quantities without any
education or training if you leave them with the money near a toy store or
arcade long enough. That is a natural and unfortunate common trait among those
who are not used to managing large sums of money. Once temporarily rich, people
develop the habit of spending large amounts of money with ease, and the habit has
got to be difficult to break. Returning to the once familiar circumstances of
being poor or even perhaps worse, being in debt, doesn't come easy, the way adjusting
to sudden wealth does. Men are inherently proud and stubborn, and that is
rarely a good trait paring. The shame of returning to poverty is just too
painful and keeping up the illusion of wealth can put a poor man into
considerable debt with the habits developed during the period of wealthy
living. Many of these young men are not even aware of how much money has been
squandered and the ego won't allow them to admit to their families and friends
that they no longer have the discretionary money to spend and party and financially
help others. The difficulty of breaking it to their crews, entourages or possess
that the gravy train has ended, can be even more painful. So, they continue to
spend, using credit cards and other forms of money on margin to masquerade as
the men they used to be, at least for a while… “Legit”. In the fast world of
players and operators, money makes a man legitimate immediately. The amount of
legitimacy to a man like this is directly proportionate to the size of your
bank account and the cash in your pocket. Nothing else is necessary to take a
man from obscurity to complete legitimacy and notoriety. Suddenly, everything
you have to say means something, but the day before the money arrived, it meant
nothing. Another notorious phenomenon among pro athletes that find themselves
suddenly bankrupt early in life is the lingering effects of fathering a child,
or usually several children, with ex-wives, ex-girlfriends and ex-hookup girls.
The hookup is the easiest thing a professional athlete can find. There are lots
of girls that believe they can go from hookup to girlfriend to wife, but it
rarely if ever works out that way. Usually, it just creates STDs, unwanted
pregnancies and sadly, many aborted babies. The chronic and acute mistake of
fathering many children, by many women and out of wedlock, the child support
debt begin to soar and pileup in a hurry. Warren Sapp, the once great defensive
end of the Tampa Bay Buccaneers and the Oakland Raiders has recently filed
bankruptcy and his over $7 million in debt to his many creditors and an
additional $1 million in back alimony and child support to ex-wives and his
children. To add to his bankruptcy nightmare, Sapp was fired from the NFL
network, a job that was paying him more than $45,000 per month, after making
disparaging comments about tightend Jeremy Shockey being a whistle-blower who exposed
the New Orleans Saints notorious bounty scandal. Sapp called out Shockey on his
twitter account, suggesting that the, then, Saints tightend opened up the
entire story snitching on the New Orleans Saints front office and coaching
staff. Sapp was fired almost immediately after his twitter message was reported
to the media. This was like rain turning into a blizzard for Sapp, but many former
pro athletes are strapped with child support payments that are relatively high
as judges designate the amount of child support based on a higher income before
the athletes spend themselves out of their fortune. The amount is a projection
of future potential earning power. Ultimately, the child support payment
amounts are adjusted, but seemingly never before the bleeding damages their
financial picture. Their income reduces quickly, but the child support and
alimony payments stay the same or sometimes increase with cost of living and
inflation because the players aren’t even aware of their financial stability,
or in this case “instability”.
Yes, the pitfalls of making cash quickly- rarely has a
happy ending. Those who are unfortunate enough to win the lottery jackpots worth
millions, tens of millions and sometimes hundreds of millions, often end up
back where they started financially, usually worse. Much of it is related to
taxes unpaid, and again, that is a symptom of becoming wealthy immediately
without the understanding of how it works in the world of the opulent and
financially privileged. People with new money need crash courses on how to keep
from losing everything. People of old money have the advantages of growing up
with those who knew how to create great wealth and how to build upon their
wealth. The learning curve for those fortunate enough to grow up with the
proverbial gold spoon in their mouths, have a more gentle learning curve.
Although, there are dangers from growing up wealthy, also, but that is an entirely
different subject. Money complicates life, though most believe that wealth is
the answer to their problems. I believe money can bring great things to your
life, but it must come with a great desire to understand it, the desire to
manage it, the desire to increase it and with the fortitude to be able to
withstand the onslaught of people who want to share in your financial success,
taking and taking and taking shamelessly. I think it takes a lot of maturity
and self-control and I believe more important than anything, sudden wealth and
those who become suddenly wealthy need a mentor, a model, a guide to take them
down paths that they have likely never walked before. These young men need to
be educated by people who have their best interest in mind, and those who have
already walked the “financial plank” and have already felt the splash of loss.
I also think the NFL should take it upon itself, be it Commissioner Roger
Goodell or perhaps officials within the NFL players Association and the like,
to offer the newly professional and instantly wealthy players the education and
guidance that is sorely needed to receive these great opportunities and to
parlay them into things that will enrich their lives, and perhaps the lives of
their children and their children to come with the knowledge of a rapidly
changing lifestyle. Without this knowledge, the never-ending cycle of
"poor man, to rich man back the
poor man, will continue to perplex and frustrate everyone involved in pro
sports and those who stand by and watch the tragedy in motion decade after
decade, superstar after superstar and sad case after sad case. Simply knowing
that this is an ongoing problem doesn't fix anything. In the beginning, knowing
that there is a growing epidemic going on in a place that most people never
expected, but action needs to take place… Adjectives need to turn into verbs.
Describing is not acting and action is sorely needed.
It's not rocket surgery, after all…
I'm just saying…
I'll be around… BH
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