Olympians might be at the top of their game, but they’re still mere mortals. And if they don’t plan right, they might fall from their great heights, Earvin “Magic” Johnson Jr. Warns.
The former Los Angeles Lakers great has five championships and a legendary stint as co-captain of “The Dream Team” (the 1992 U.S. Men’s Olympic basketball team) under his belt. Speaking to BBC’s Katty Kay, the now retired businessman gives young Olympians some advice about how to prepare themselves for financial success and stability.
“If you’re earning money, please get you a business manager,” Johnson said in an interview released in late June. He told Kay through laughter that many young athletes forget about the taxes due on their newfound money, and that “the IRS will be calling.”
Speaking to athletes as young as 16, Johnson first implored them to have fun and live in the moment. But he also encouraged them to plan for the future, or at least look for others who can help them do as much. “You’re going to make money so make sure somebody is there who has the knowledge to help you understand,” he added.
And Johnson did as much when he began his famed basketball career. “I didn’t know money when I grew up, my parents didn’t know money. So when I got to the NBA I had to find people who knew money. That’s why I’m sitting here,” he said, explaining that his choice to get a business manager was different from most other athletes at the time.
It’s not about hiring the people you like the most either. “They hire these people not because of expertise but because they’re friends. Well,they’ll fail,” Johnson said of players that rely on friends or family for financial advice instead of a manager in a 2009 Sports Illustrated interview.
Playing a sport can take an undue physical and mental toll, and pro-athletes often have a short window before they retire to make a name for themselves and generate enough income to live on for years to come. Finances can be deceptive, as some athletes come into a large sum of money at a young age and find themselves blowing through it while navigating a tricky system.
Historically, professional athletes have struggled to budget all the way towards retirement. A working paper published in 2015 from the National Bureau of Economic Research, found that 15.7% of NFL players have filed for bankruptcy within 12 years post retirement. About 6% of all NBA players will go bankrupt 15 years after retiring, according to a preliminary finding from the Global Financial LIteracy Excellence Center.
Either way, athletes face an uphill battle while managing a small crunch period where they can make a lot. Basketball great Kareem Abdul-Jabbar weighed in on the subject in 2012, opening up about an agent who mismanaged his money in the ‘80s. Explaining that the “upper echelon” of players now are “paid on a scale that players from my generation could only dream about,” he noted that athletes can find themselves in similar financial duress despite a new era of salaries.
“Too many of these stories deal with athletes who earned hundreds of thousands, if not millions, of dollars on the playing field but ended up destitute within a few years of their retirement,” he said. Former athletes often battle stress caused by financial mismanagement and the brain damage that football can cause, he adds.
Highlighting Johnson’s success, Abdul-Jabbar spoke of a new model of financial prowess for athletes that relies on making smart investments and advocating for greater ownership of their name and brand. Noting the now billionaire’s purchase of the L.A. Dodgers, he explained that Johnson built his empire by investing in properties and franchises.
“Magic was able to reach this level of financial power because he always kept his eyes on that specific goal. While he was still playing for the Lakers, he made a deal that nailed down a percentage of the club ownership,” Abdul-Jabbar noted, explaining that this deal grew over time.
Indeed, Johnson became an entrepreneur after he retired, telling BBC that he “always always wanted to become a businessman,” after he was done playing. He advised the next generation of athletes to “enjoy yourself, meet people from all over the world, and then don’t get ahead of yourself.”
Warning against burnout, he encouraged athletes to listen to another key voice aside from a manager: their parents. “Your parents are there for a reason; they know everything you’re trying to achieve,” he said.
