Money lessons from former NFL player Phillip Buchanon
When it comes to money, NFL players have famously fumbled. Former wide receiver Terrell Owens, who made around $80 million over his pro career, filed for bankruptcy in 2012. Former Miami Dolphins quarterback Dan Marino reportedly lost close to $14 million after a bad investment in 2012. And former quarterback Vince Young, who spent six seasons in the NFL, made headlines in 2013 for defaulting on a $1.9 millionloan.
The problem is widespread: Research published in April from the National Bureau of Economic Research found that 16 percent of players drafted by NFL teams between 1996 to 2003 filed for bankruptcy within 12 years of leaving the NFL. Baseball players, celebrities and anyone else who comes into fast cash is similarly at risk.
That's why former NFL cornerback Phillip Buchanon wrote his recently published book, "New Money: Staying Rich." Buchanon, who is 34 and lives in Miami after spending almost a decade in the NFL, says he wanted to show athletes and others who suddenly find themselves with money how to handle it. "I thought it was important to share my story so I can shed light on the issue and show family members what it's like, so they can stop putting so much pressure on [athletes]," he says.
Buchanon says he was never comfortable with money, and he learned many financial lessons the hard way, like when his mom told him that he had to give her $1 million for everything she had done for him. He did not give her the money, but he did buy her a house – a decision that ended up causing significant financial strain.
Buchanon says the experience taught him an important lesson about setting boundaries when family members make requests. Now when a family member approaches him about needing money for something like a home repair, he offers to pay the handyman or other service provider directly, instead of handing over cash.
In the book, he also shares some of his overspending and business mistakes. "I messed up a lot," he says. In the introduction, he writes, "My hope is that nobody will have to go through what I went through. My mistakes were hurtful and expensive, and they don't have to happen to you."
In recognition of those challenges, the NFL's Player Engagement Department runs a series of boot camps, including a finance camp, for players. The NFL Players Association, the union that represents professional football players, also makes an effort to educate athletes about finances. "One of the things we recognize is that players receive a significant amount of wealth in a very short period of time, so unlike most professionals, they have a very limited opportunity to become acclimated to it," says Dana Hammonds, director of player affairs and development for the NFL Players Association. According to Forbes, the average salary for the 2013 NFL season was $2 million. Hammonds points out that the average NFL player likely makes the same mistakes that a typical 20-something might make, but because they have more wealth, those mistakes are costlier.
To help players manage their wealth, the NFL Players Association partners with Financial Finesse, a financial education provider, to provide an online learning center with financial assessments, videos, games, tutorials and more. Through the website, players can track their money goals and devise an action plan. The NFL Players Association also provides a financial help line, seminars and a director of financial advisors with experience working with NFL players.
But money management doesn't have to be as challenging as scoring a touchdown. Here are some money lessons Buchanon wants fellow players – and other recent entrants to the millionaire's club – to take away from his book:
1. Draw a line between wants and needs.
"Understand that you can only do certain things," Buchanon cautions, and that lesson applies to family members, too. Just because you are suddenly earning a big paycheck or attending parties with Jay-Z (as Buchanon was) doesn't mean you can necessarily act as though you have unlimited income forever. To make it last, Buchanon says, you have to set limits.
2. Watch out for takers.
"Once you get a lot of money, you automatically become a giver, and everyone else is a taker. You have to have a limit, because takers don't have limits. They'll keep asking you because they think you've got it," Buchanon says. He urges others, especially anyone who comes into a lot of money, to set boundaries quickly, before anyone takes advantage of you.
3. Surround yourself with real friends and mentors.
Some friends are just "fun" friends, Buchanon says, and want to be around you for the entertainment (and cash) that you can provide. But real friends help you make better decisions about your life, he says, and mentors, who have gone through what you are experiencing, can help guide you when it comes to relationships, business, money and life. "People who've already been there can help you find your blind spot," he says, adding that he has found several who have guided him to where he is today.
4. Ask questions when getting financial advice.
When Buchanon started working with a financial advisor, he suggested that Buchanon buy an insurance policy that would pay out in the case of a catastrophic injury. While the insurance itself might have made sense, Buchanon later found out that the financial advisor received a payout for making the sale. Buchanon felt betrayed to discover the conflict of interest and soon stopped working with him.That's why Buchanon recommends making sure you fully understand an advisor's recommendations – and motivations – before agreeing to follow any tips.
5. Build your post-NFL career.
When players retire from the NFL, it can be hard to figure out what to do next. Chances are, any subsequent careers won't garner as big a paycheck as the years on the field did. But they can be fulfilling, both professionally and financially. In addition to writing his personal finance book, Buchanon is working on a companion board game and app, as well as writing novels and a movie script. "It's a longtime dream of mine," he says of the script.
Another dream is helping anyone coming into new money to avoid some of the mistakes he made. Instead of it quickly disappearing, "I want [their money] to become permanent money," he says.
Copyright 2015 U.S. News & World Report
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