You've heard the story before. A professional athlete who made millions is now filing for bankruptcy, claiming that he's broke, or has to sell off a bunch of assets because he's owes people some money. In the latest issue of Sports Illustrated, writer Pablo S. Torre looks at the reasons why and how million dollar athletes go broke. The reasons range from terrible investments to not knowing how to manage money. But one of the biggest causes is friends and family being hired to manage funds or be in charge of an expensive investment or project.
"That's the killer," Magic Johnson told SI. "It won't even be a conversation. They hire these people not because of expertise but because they're friends. Well, they'll fail."
"They'll say, 'I got this guy, a cousin who's an accountant,'" added Angels outfielder Torri Hunter. "But he's usually an accountant in the 'hood. You hire him, you're doing him a favor."
Former NBA guard Erick Strickland shared an experience where a friend of a friend approached
him with a real estate deal where he could purchase land apparently valued at $3 million, for a low price of $1.8 million. He had his dad, who was his business manager, look over the deal and it seemed legitimate. After the deal was done however, the land wasn't even worth what he paid for it.
"I trusted my father to help look it over for me because I was hooping and didn't have time," Erick said. "He checked it out. But he didn't go that extra length. I had to take that hit. I wish my dad hadn't been put in that position. He just didn't have the knowledge."
Nowadays younger athletes are being a bit more careful with their money, but there are still some who invest in silly things like record labels, poor real estate, and some really bad inventions.