Former NBA Player Josh Childress Explains Why Athletes Go Broke
How could someone with 11 million dollars go broke? Former NBA small forward Josh Childress lists the reasons, and they sound all too familiar—starting with spending too much money on housing.
The video, titled “Why Athletes Go Broke,” is a Grit interview with Childress in their “Shooting the Sh*t” series (Grit includes the asterisk). What does it take for a multimillionaire to end up with an empty bank account? Childress states that “I was always able to keep [my spending] in check, to an extent,” but knows first-hand how other athletes can spend everything they earn and more.
“The first mistake,” Childress says, “is people say ‘okay, I got 11 million dollars.'”
Childress explains that it turns out to be “$5 million over four years,” which means that athletes who buy a million-dollar house in their first year have just committed to spending a larger percentage of their annual income on real estate than they realize. “That house then becomes more expensive. You buy a house, or some guys rent, whatever, most guys buy their mothers a house or a car or something, they buy themselves a car, you’ve got a 2-4 percent agent fee, you’ve got the NBA escrow, so that check gets eaten up.”
NBA rookies, like anyone else starting a new job, also have to pay to—as Childress puts it—”represent myself like a professional.” It’s no longer appropriate to carry around worn-out bags, for example. Everything has to look new and high-quality, which means spending high-quality prices.
Childress also notes that some rookie players get swept up into “the life,” and if they see other NBA players around them spending more money, they will feel encouraged (or pressured) to spend just as much. “You get caught up in that, and you end up spending way more than you should.”
We can probably all recognize the feeling of wanting to keep up with friends and peers, spending-wise. I know I’ve done that more than once. (Sometimes more than once a week.) Turns out this problem scales upwards, even if you are a multimillionaire.
Watch the full interview below. Hat tip to Business Insider, where I first saw this.
Photo credit: Dan Fornal