Just because you make a lot of money, doesn’t mean you don’t spend even more. In Chapter 2 of Turning Money Into Wealth we look at the importance of budgeting and how to actually set up an effective budget – and in Chapter 4 we look at taxes, and let’s face it, you’ve got to pay them. In Chapter 18 we look at the 12 keys to financial success, and one of those keys is to “Embrace the “B” Word (Budget).” Unfortunately, it’s awfully easy to ignore this advice and just try to “wing it.” And, it doesn’t matter how much or how little money you make, without a budget in place, you can run into real problems.
Apparently, that’s what happened to Santana Moss, the 32-year old Washington Redskins wide receiver who was a 2001 first round pick of the New York Jets. According to a recent Washington Post Insider article, “Santana Moss reportedly owes $258,017 in back taxes,” Santana has a base salary of $2.25 million this season, along with a bonus of $250,000. He isn’t the only celebrity to experience financial difficulties. In fact, there is a website that is devoted entirely to Celebrity Bankruptcies – what does all this go to show? That having money doesn’t mean you won’t experience financial difficulties.
For athletes, the problem seems to be even bigger. In 2009, Sports Illustrated looked at this problem in their classic article, “How (and Why) Athletes Go Broke.” Some of their findings were:
- By the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce.
- Within five years of retirement, an estimated 60% of former NBA players are broke.
In order to avoid financial problems you have to earn more than you spend, and the only way that happens is if you have a budget.
- Have you set-up a personal budget, if so, what difficulties have you experienced in making it work? Be prepared to share this with your class.
- According to the Sports Illustrated article, “How (and Why) Athletes Go Broke,” where did the athletes go wrong and how do these mistakes relate to the 10 Principles of Personal Finance introduced in Chapter 1? (This can be assigned as either a short paper to hand in or for discussion in class.).