By Marcus Shockley
No doubt you’ve heard the recent news of Allen Iverson’s financial woes, ignited by his judgement against him from a jeweler to the tune of over $800,000, but this isn’t a surprise. In 2010, it had already been reported that Iverson had massive money problems.
This isn’t really a story about Allen Iverson, one of the greatest scoring guards to ever step on the court and a player whose fearlessness was an awe inspiring sight to witness. Iverson has a lifetime of bad decisions and recklessness that make this result almost a given. It doesn’t matter how much money Iverson blew through, whether it was $150 million or $500 billion, it was inevitable.
Instead, this is a story about everyone else. I’ve had several columns in the past about how players should educate themselves about money, and this is one more cautionary tale to throw on the stack. But something specific about Iverson’s story struck me as a perfect example of why, and how, someone could blow through a fortune in such a short amount of time.
In one article from the Philadelphia Inquirer, it was reported that Iverson’s entourage would sometimes be in the range of 50 people. Fifty! Here’s the thing that people, including professional athletes, fail to grasp. Iverson was basically an industry that had as many as fifty people on a lavish payroll, and that’s absurd. Most multi-million dollar businesses don’t have fifty employees.
To explain this, let’s break away from the world of sports for a moment and talk regular, run-of-the-mill business. The most recent average salary reported in the U.S. was $30,513. That doesn’t count for health insurance and other factors in employing people, but for sake of this discussion, it will be fine to just use this number.
Let’s say you have a business selling, oh, let’s say really expensive shoes. You employ 30 people at the average salary of $30,513, meaning your payroll is $915,390 per year. Ok, so with only 30 people on staff, you are paying almost a cool million every year just for ‘average’ salaries. Now, you might be yelling at your computer screen ‘what are you talking about? Iverson had an entourage, but he wasn’t paying them like staff!’, and you’d be right, except an entourage is worse. You are paying for plane tickets, clothing, rent, food, lavish parties and all kinds of travel expenses and not even getting the benefit of people producing more product or revenue for your business. Expenses like this are way, way more than $30k per year per person. It can be easily triple that, or more. Private jets are not cheap. Designer clothes, posh restaurants, all of that requires a much bigger amount of cash. It could easily run you $1,000 per day per person or more. A weekend in New York City or Vegas can be $30,000 a day per person if you are determined to blow it right. There are hotel rooms in Vegas that run $16k a night – just imagine a weekend of 10 pals who think they have an unlimited budget. If you have an entourage of 20 people (which is a BIG entourage) who are sponging off of you to the tune of $365,000 per year, that’s a $7.3 million in expenses per year, and Iverson’s entourage has reached members almost twice that, and that’s not even counting his penchant for gambling and blowing money, for those interested, check out this page where all this has been well documented. If Iverson’s posse could conceivably blow through $20 million a year without being checked, how much could Iverson’s own family blow through? How much could he blow through on his own? Is it really that hard to fathom that he and his pals could easily eat through every last dime of $150 million?
Just to be clear, I’m not saying these are the actual numbers spent by Iverson and his buddies. Just illustrating that it’s pretty simple to slice up even a gargantuan paycheck if enough people get involved without contributing.
Here’s the point. If you are fortunate enough and talented enough to get a big payday, like Iverson did in the NBA, then you must realize that the money is not infinite. Iverson was running his life like he was a billionaire, but he was a millionaire with a finite number of years he could make that money without investing in something else. Hard reality check: millionaires should not be buying Bentleys or private jets. Billionaires can do that, but billionaires own basketball teams, they don’t play for them. Just like most lottery winners, Iverson spent all of his money as fast as he made it, seemingly unaware that the paychecks would eventually stop.
For most players, even if they reach the NBA, their earning years will be limited to less than five. Iverson had contracts far above the average player – he was a superstar, with superstar contracts and superstar endorsements. Now he’s broke, and the Lakers won’t even look at him unless he goes through the D-League. The reality is that Iverson will probably not play again in the NBA, and if he does, it won’t be for long, and it certainly won’t be for the amount of money he made before.
And yet, Iverson won’t be the last. Players will continue to end up on the front page for sob stories like this, and it’s painful to watch. It’s painful for me because I see high schoolers who are dreaming of making the NBA, dreaming of getting a big paycheck where they can take care of their family, and dreaming of all of the other things that come along with having enough money. Most of them won’t make it past their college teams, but for those who do, that paycheck is the culmination of years of work and focus. It’s too bad that after so many years of working, dreaming and dedication, only a few years later it’s often all over. The worst part is, once your playing days are over, they are over. When you are young, you don’t have much but the future stretches out before you like a canvas. When you are older, you still have a lot of options for the future but the one for athletics is no longer available. Even if you are a great athlete at age 35 or 55, you won’t be able to keep up with the 21-year-olds coming out of college.
We all need an ‘out’ in order to have hope. Something that we can work on, something that might pay off big in the future. The problem for many athletes, once they get the big paycheck, they think that pay off arrived, so they are set. But unless they barely spend their money, they aren’t set by a long shot. That money they earn over a few short years has to either turn into investments for the future or it has to last the rest of their life after they aren’t in demand for their athletic ability anymore.