Mike Tyson was the youngest man ever to win the heavyweight title at 20 years old. This was back in 1986. At one time, the former boxer was worth US$400 million. But Tyson was a spendthrift who declared bankruptcy in 2003, even before retirement.
Similarly, NBA superstar Allen Iverson earned over US$154 million in salary during his 14-year career. This excluded the millions more he earned in endorsements, including a US$50 million lifetime contract with Reebok. Iverson was reported broke in 2012.
These two situations represent several other incidents involving famous athletes who have found themselves in financial trouble. They share a few things in common regarding how they lost fortunes, including a small earning window, a lack of financial planning, and overspending.
Athletes’ incomes are unpredictable and can fluctuate. They usually have a limited earning window and make most of their money at a young age. This implies that they must amass wealth that will last beyond their playing years within a short period, unlike in other professions.
But with potential injuries that could end their careers unexpectedly, this window can grow even smaller, leading to financial instability if the athletes do not take the right measures early on in their careers.
Financial literacy skills, such as budgeting, saving, investing, and understanding financial products and services, can help secure their future.
Robert Ochieng, CEO and Co-Founder of Abojani Investment – a financial and investment advisory firm based in Nairobi – says one of the major challenges that athletes face is irregular income, which they are paid in a lump sum.
“One of the things that I insist on, is to have a roadmap for your life. Have a plan, especially the big purchases that you need to make. Whether it is a home or whether you need to create a retirement plan. You start looking at it early enough,” said Ochieng.
Additionally, many athletes are fortunate to have amazing experiences on the field before being hit with the harsh reality of transitioning into a completely different world once their prime season is over.
“It’s important for them (athletes) to know that so that they can start preparing early enough. We call that something to live for. Do you want to be a coach? Do you want to integrate with the community? Do you want to work with the ministry? Do you want to work with corporate? Start seeing that, so that you can be able to transition and find something that you can still do to keep you busy,” he added.
Two-time Olympic gold medallist Faith Kipyegon says there is a need to invest. “An athlete’s career is very short, and the lessons we got during the training sessions have opened my eyes to the need to save the little I get for the future,” said the 1500m champion during a Team Kenya Financial Literacy and Media Training session in Eldoret in early July.
Ochieng also notes the importance of obtaining information beforehand so that athletes are in a position of knowledge when they start making money.
“If you’re an athlete, it’s good to have information on the nature of careers that athletes have. They are likely to be active from age 20 to 35. You just have 15 years of active participation in your career, and probably from age 35, you should have built a good portfolio that you can live off.”
If athletes heed the practical advice from financial management experts, they can make informed decisions about their earnings and future investments.
