Lately, there have been a number of articles on professional athletes who have lost millions of dollars due to poor financial decisions. The athletes range from golfers to boxers to professional baseball players and their poor decision range from buying cars, women, and tigers to battling gambling addictions and making poor business investments. There are also those who have been swindled by their agent, their accountant, or their ex-wives. Most of these problems are due to a lack of education and some are due to a lack of maturity. Whatever the case maybe, these problems have opened doors to entrepreneurs who are in the business of financial and risk management.
One startling statistic states that 78% of NFL player enter bankruptcy or financial distress within two years of retirement and 60% of NBA players go broke within five years of retirement. These athletes know that they have plenty of money and do not think about what will happen when they stop receiving those multi-million dollar checks. A lot of them do not understand business and/or finance. Some of them may have never even taken a single class of either one in college. Some professional athletes may not have time to focus their finances. The stress of having to produce on the field does not leave much time to focus on off the field issues such as investments or retirement plans. Raghib “Rocket” Ismail, a former professional football player who signed the largest salaries of his time in 1991 at $18.5 million over a four year period, once said, “I once had a meeting with J.P. Morgan and it was literally like listening to Charlie Brown’s teacher.” It’s not that he is not an intelligent person but without focusing on the details many professional athletes find themselves left out in the rain when their money is gone.
Of the athletes who have gone broke have not all have necessarily lost their money because living extravagant lifestyles. Some have tried to make investment and plan for their futures but did not have people that they could trust managing their money or they tried to manage it themselves but did not have the time or knowledge to do so properly. Some of them have invested in high risk businesses that flopped and some invested in businesses that had no chance at all. One player once invested in an invention that consisted of and inflatable raft that attached to the bottom of a couch so that people who lived in areas with high rainfall could pump up the raft and float on their couch when their area flooded. Had this player had someone in the business of financial/risk management that he could trust and that was reputable then he would not have lost his money on such a silly investment.
Financial/Risk management companies that athletes should use are those that have a good reputation with all of their customers, not Uncle Joe’s accountant down at the local strip mall. These companies should try to educate their clients on things that they do not understand by offer consultation sessions and possibly workshops on financial management and personal finances. If they are trying to keep the athlete in the dark then they are probably trying to get over on them in some way. Every investment does not have to be a “homerun.” These companies should try to keep the athletes risk within reason.
Financial/Risk management is key to the financial stability of everyone no matter how much money they make. If every investment a person makes is going to be high-risk and high-reward then they might as well go a casino because all they are doing is gambling anyway. Although it is bad that so many athletes are having this problem, it is opening doors for those entrepreneurs in the risk management business. Athletes have to understand that even sports are businesses and they have to view themselves as independent contractors who have to run and manage their business.
Despite being on the losing spree, the people might gamble more with the hope that they will win the next game. Even the sweet memories of the past victories force the people to play more. A recent study has revealed this trend. The authors of this study have published the outcome of this study in the Journal of Experimental Psychology. In this article, we would be looking at the interesting findings brought out by this interesting study.
The study found that people chose to go in for further plays when the scientists reminded or primed them of past winning outcomes. It has found that people were over 15% more likely to play more by selecting the risky option. The research team from the University for Warwick in Britain believe that memories of the people play a crucial role in making certain decisions. When the team interviewed people who are in the habit of gambling, they found that subtle cues about the past victories play a significant role in propelling them forward to gamble more. This is clearer in people who go for gambling in local casinos. The gamblers even place millions of dollars in cash on the table for the final showdown in some poker tournaments with the hope that they would win in the next game.
The researchers had come with the hypothesis that memory of winning outcomes in the past forced the people go for more gambling in casinos and risk lots of money on the table. The results of the study more or less confirm the roles these cues play in forcing the people to play more, risking their money. In order to cross check the hypothesis, the researchers manipulated the memory of the participants for past winning outcomes with simple risky choice tasks. The researchers achieved this by asking the participants to select one of the two doors as part of a computer test.
The authors of the study gave the participants the choice of four coloured doors to select from. Three of the doors always led to guaranteed outcomes (0, 40 or 80). On the other hand, the fourth door led to a risky 50/50 outcome that carried 20 or 60 points. Later in the study, the team members reminded the participants about their past winning or losing outcome based on the points that they got, depending upon the door they opened. When the team members told the participants about the points they had got, they tended to go towards the risky door more often.
Learning how to take risks in your life is a key skill in achieving success throughout your entire life. Every successful person in all areas of life has taken some risk at some point in time. There is a big difference between taking a risk and gambling. Many people are not able to distinguish a significant difference between the two. We are going to talk about the difference between each of these things so you can understand them in detail. From now on, make a commitment to yourself that you only take calculated risks and not gamble with your life or your money.
We all have heard stories about people who go to casinos while they’re on vacation, mainly in Las Vegas. Las Vegas is known for the millions and millions of dollars that people lose each and every year because they have an addiction problem. This addiction problem comes in the form of gambling with money that they really do not have to spend or lose. It is sad and unfortunate, but many family members gamble with their life savings or their child’s college tuition money. Gambling has become a serious an addict of the problem in our country today.
A personal friend of mine that I have known for a few years now has always been a saver and a diligently hard worker since the first day I met them. It was only six months ago that I heard a story about my friend losing all of his money at the racetrack. Deep down, the person had an addictive personality that led them to continually gamble, and eventually lose all of their money. This is something you do not ever want to have happen to you.
Taking a calculated risk is completely different than gambling. When you take a calculated risk, you are making an educated guess based off of a set of rules and information that you follow. For example, professional stock traders go buy a set of rules whenever they are placing a trade. They know exactly when they will get out to if the trade goes wrong and they stick to their rules. They have a calculated amount of money that they are willing to put at risk and lose that will not damage their portfolio. This is called taking a risk, but it is a calculated risk. Emotions do not have anything to do with taking this calculated risk, it is all based off of logical data.
Many people who gamble are emotionally addicted to the process. People who take calculated risks only use their logical thinking part of their brain. Daniel Goldman calls this emotional intelligence. This is a key skill and learning what the differences between gambling and taking a risk.