Recently, I read an article from Yahoo Sports about former Indiana Pacers player David Harrison. After earning $4.4 million in four seasons with the NBA, plus some time overseas playing professionally, the 32-year-old basketball player is nearly broke. We’ve heard about these scenarios before, but this story exemplifies why financial illiteracy is like a cancer. It does not discriminate by wealth. It does not care about race or gender. Simply put, not understanding your financial situation and circumstances can ruin your life.
Harrison can’t even work at a local McDonald’s restaurant, not for lack of trying. Customers recognized him – it’s difficult to miss a 7-foot person taking your order – causing them to ask questions and end up taking 40 minutes to order, according to the article. So he had to leave McDonald’s. Banks foreclosed on his home and tried to repossess his car, and he still provides for his infant son. He says he can’t even afford to finish the final 16 credit hours needed to earn a degree (he left college early to play in the NBA). Needless to say, his life now is extremely different from his life when he was playing in the NBA.
Even though most of us won’t be retiring from the NBA, this example shows the importance of having a reliable stream of income when your main source of income stops – no matter your age or profession. It’s something that’s all-too-often overlooked. I’m sure Harrison would appreciate having some level of steady income right now. And, he probably wouldn’t care about the rate of return on that income – he would be more focused on the bills he could pay instead.
The Bottom Line: Financial literacy begins with education and planning. Understanding income needs and potential pitfalls could help your clients avert many hardships later in life.
© 2018 Ash Brokerage LLC.