By: Charis Rebecca Brown, clarkhoward.com
Yes, you read that right: The average monthly spending of an NBA player is almost the same as what an average American makes in a year!
The average NBA player spends $42,500 per month
According to the Bureau of Labor Statistics, in 2015 the median average income for adults 16 and over was $809 per week, or $42,068 per year.
But a recent analysis of over 50 NBA players by Personal Capital, a personal finance tool, found that NBA players spend roughly $42,500 per month — equaling about $510,000 per year. That’s just about $500 less than the average person makes in a year! But NBA players make far more than the average American: An NBA rookie salary is $4.7 million before taxes.
So where did they spend the most money? As it turns out, 11% of their budget centers around clothing and shoes, the biggest trackable spending category. A favorite among NBA players was the retail clothing store Express, which carries a great selection of Tall & Extended sizes. (Basketball star Stephen Curry, MVP for the Golden State Warriors has also been a brand ambassador for Express since 2014.)
Other frequented retailers included Whole Foods, Neiman Marcus, Louis Vuitton, Apple, and Mercedes, but they also spend a good deal at stores like Target and Walmart too.
The San Francisco Chronicle shows a breakdown of NBA players’ spending:
So what about the other 39% that has no name? This was difficult to classify, since it could have been rent paid to a individual or a mortgage paid to a bank.
As income increases, spending increases
But at what point do we really spend more than we need? And why do we do it?
There is an economic theory as to why we tend to spend more as our income increases. The “marginal propensity to consume,” as its called, says that as income rises, spending rises in tandem. So it would make sense that as pro sports players’ income increases, their spending does too.
But if you’re not saving a good chunk of money during your highest-earning years, that’s can be financially disastrous when you’ll most need the money later in life.
When it comes to celebrity sports finance, the statistics are staggering. At least 78% of former NFL players go bankrupt within 24 months after they stop playing, while almost 60% of former NBA players go bankrupt within 5 years of retirement. In fact, one NBA player who amassed a $100 million dollar fortune lost it all due to some big financial missteps and personal hardships. He got a second chance working at Starbucks.
And researchers continue to chronicle how professional athletes report extraordinarily high levels of bankruptcy or financial stress just after their retirement. Old habits die hard and once spending habits are set, it’s difficult to adjust once income isn’t what it used to be.
That’s why learning to spend less is one of your greatest assets when it comes to your financial well-being — arguably even more important than earning more money. After all, it’s not about the money you make — it’s all about what you actually keep!
Not all pro athletes spend so much
Though these are sad facts, if players gain financial knowledge before they spend their fortune, they will have financial provision for years to come — and their fortunes could well live beyond them — benefiting future generations.
Case in point: The Washington Redskins. Players on this team have a fierce tradition of living on less than they make.
A recent Wall Street Journal article reported a culture of thrift on the Washington Redskins team — they even try to outdo each other when it comes to frugality!
Alfred Morris, a runningback, makes $1.5 million a year and drives a 1991 Mazda 626, while pass rusher Ryan Kerrigan shares a basic apartment with a roommate — in spite of signing a five-year $57.5 million contract.
Quarterback Kirk Cousins really gets it. He drives a 2000 Savana passenger van and says of his purchase, “It’s better to buy appreciating assets than depreciating. No yachts, no sports cars,” he told the Wall Street Journal.
Rob Gronkowski, the New England patriots’ dominant tight end, is also very frugal. “I live off my marketing money and haven’t blown it on any big-money expensive cars, expensive jewelry or tattoos and still wear my favorite pair of jeans from high school,” he wrote in his book, It’s Good to Be Gronk.
Even though many people would think these players are crazy for not living a lifestyle fitting for their income, they know that they will not have such large incomes long-term. There’s a lot of wisdom to spending far less than you make, especially in a career that is likely to be short-lived.
When Clark advised the Green Bay Packers several years back, his most important piece of financial advice was, “Save more and spend less than you make.”
So what about you? Have you created room in your budget for a rainy day?
If you need some help getting started, check out the links below!
- This savings strategy led to an early retirement at age 33
- 19 ways to cut costs & save more every month
- How to save more money: Rethink your spending
- 5 big mistakes to avoid when you start saving money
For more information follow this link, clarkhoward.com