1. Bad Investments

• While many entertainers and pro athletes have the right idea, they make many mistakes when it comes to investing their millions. Rather than follow the more conservative path, allocating small percentages to things like private equity and real estate, making sound small business grants and watching it grow. Rather dedicating most of their attention to quality stocks and mutual funds, most do the complete opposite. With little or no interest in the stock market, they invest most of their money in “sexier” ventures like restaurants, car dealerships and clothing lines; all of which has a higher chance of going belly up.

 

2. Frivolous Spending

• Entertainers and pro athletes spend like they are in gargantuan contracts. This is especially true for newcomers who come into the industry or league who feel the pressure to maintain the same lifestyle as a veteran. Mansions, cars, jewelry, and clothes are bought at an absurd level during their peak earning periods. When a newcomer is suddenly getting paychecks in the ballpark of $500,000 every two weeks, the idea of remaining somewhat conservative while planning for the future seems ludicrous. They fail to realize that once the income stops, the monthly payments don’t.

 

3. Misplaced Trust

• As soon as these new entertainers and pro athletes sign their names on the dotted line, they are surrounded by vultures in the disguise of investors, financial advisors, and even friends and family who would tell them how to “protect” and spend their fortunes. They’ll be approached by all types of services wanting to “help” them out, but who will charge them an arm and a leg for the privilege. While these elite clients are busy, they have no clue what is happening in their own bank accounts, and most can’t be bothered to find out, so they hire people to take care of their “business” for them. We believe that you should never entrust someone else to have complete control over your finances; this should be a shared responsibility and you should NEVER be too busy where you cannot keep with it enough to at least monitor what your financial manager and others are doing. We focus more on managing financial data instead of having sole power over finances. 

• Between 2005 and 2008, over $42 million dollars was lost due to crooked advisors.

 

4. Divorce

• Between 60-80% of entertainer and pro athlete marriages end in divorce.

• No athlete or entertainer in history understands the financial cost of divorce like Michael Jordon. When all was settled the former NBA superstar handed over $168 million to his ex-wife Juanita, placing him ahead of Neil Diamond and Steven Spielberg for the most expensive celebrity divorce. Fortunately, his endorsements and business deals have kept him out of the poor house. Not all entertainers and pro athletes are so fortunate. Most divorces occur after leaving the limelight or retirement, when the pay checks are no longer coming in. In accordance with American divorce law, the spouse typically could be entitled to half of the assets, including everything earned during the career.

 

5. Children

• Diapers for one baby are expensive. Some entertainers and pro athletes have given the industries a black eye for having many babies, with many people. Monthly child support payments definitely add up.

       1.) One boxer has 11 children

       2.) One former NBA athlete has 7 children. He was divorced and had                   to give up nearly half of his assets; close to $10,000 a month in                         child support and the license plate on her car reads “HISCASH.”

       3.) One entertainer has 9 children with 9 different women. At roughly                 $3,000 a child, his monthly child support payments are equivalent                   to what some people make in a year.

 

6. Entourage

• One big problem with becoming wealthy is that most entertainers and pro athletes usually do it alone. If you suddenly win the lottery, it would be perfectly normal for you to want to take all of your friends on an all-inclusive trip somewhere. However; one big problem is that they didn’t win the lottery. What happens is that many newly rich entertainers and pro athletes “hire” their friends to perform the various jobs (accountants, lawyers, marketing managers, etc.) required to keep their s**t together while they are busy with their careers. While this may seem like the right thing to do, these friends are not necessarily qualified to handle million dollar accounts or high profile real estate deals. Mistakes are made and millions of dollars are lost. I was once told by Magic Johnson that when athletes call him about business advice, he would literally hang up on them when they tell him that they have hired a friend or family member to handle their affairs. When you are getting checks at $500,000 dollars a month, it becomes difficult to say no when someone that you have known your entire life starts asking for a few thousand dollars. Just be careful of “friends” and “family” who come out of the woodwork soon after you sign that huge contract.