April 15, 2015

NFL Players Don't All End Up Bankrupt

The idea that NFL players all end up bankrupt is kind of a common myth.    In 2009 Sports Illustrated published an article saying that "78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce."     I think that data point has been spread around that 78% go bankrupt which is pretty much saying almost all of em.     But the article really says that they "have gone bankrupt" OR are "under financial stress" because of "joblessness or divorce".     Thats really 3 things there.  1, bankrupt  2. unemployed or 3 divorced.    I mean doesn't joblessness and divorce pretty much always cause some form of "financial stress"?    Yeah pretty much.

A new study has much different result when they look at bankruptcy rates alone.    Bankruptcy Rates among NFL Players with Short-Lived Income Spikes at NBER  found that 12 years after retirement 15.7% of players have gone bankrupt.    Thats certainly a huge difference from that 78% figure above.

15.7% of players going bankrupt in 12 years is still a pretty high rate.     But how does it compare to the general population?    

About 1 million people (roughly) go bankrupt every year.   You can find the US bankruptcy stats here.  Thats roughly 1 in every 120 households.   In a 12 year period we'd see about 12 million bankruptcies which is roughly 10% of American households.    Then, figuring roughly, about 10% of Americans go bankrupt over a 12 year period.

NFL players go bankrupt about 50% more often than the US average.

Thats still bad given how much money the players make.  But theres some major causes for it.  Most of the players have short careers and do not make the mult-million salaries.     A short and high paid career may lead players to spending beyond their means while they have money only to end up bankrupt shortly after their careers end.   That result is almost natural and predictable.   Give any average American $1 million today and then give them a random chance of getting another $1 million next year and then expect to manage it prudently for the next 25 years and I bet the failure rate will be pretty high.


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