In light of all the current excitement in the world of professional sports with the World Series finishing up this week, the NFL heating up, and the NBA season starting, a frequent topic of discussion is player salaries. This seems particularly salient given that the New York Yankee’s payroll for 2009 tops 200 million dollars.

When I hear these numbers, it brings to mind a Sports Illustrated article from earlier this year documenting the poor job that most athletes do in managing their money. While many of us cast a bit of an envious eye on the salaries that some top athletes make (for example, Tiger Woods was estimated to have made $110 million last year), the statistics on athletes who wind up broke despite multi-million dollar paydays is staggering. Some interesting statistics:

• Within 5 years of retirement, 60% of NBA players are broke.
• Within two years of retirement, 78% of NFL players have gone bankrupt or are under financial stress.
• Divorce rates for athletes range from 60-80%. Emotional issues aside, this also tends to have a major negative financial impact, especially if there are children involved.

The article outlines a number of contributing factors. Some of the most common are naiveté about financial affairs (certainly not uncommon for most folks in their early 20s) poor decisions about whom to trust (especially when it comes to managing millions of dollars), and a desire for tangible investments in things like businesses and real estate that seem easier to understand (though are almost always riskier) than stocks and bonds.

Reid Klion