Few among us haven't dreamed of sudden riches - the financial windfall of a big legal settlement, an unexpected inheritance, a winning lottery ticket, or, for the young and athletically gifted, a lucrative contract with a major professional sports franchise.
But it turns out that few are prepared for a financial windfall when it comes their way.
Nowhere is this more obvious than with big sports stars.
Despite the proliferation of multimillion-dollar contracts, an astonishing number of professional athletes are forced to declare bankruptcy within a few years of hanging up their jerseys.
In the National Football League, for example, where the average salary is $1.9 million, 78% of former players are in bankruptcy within five years of retirement. That figure is 60% for former National Basketball Association players, who earn an average of $5.5 million a year as players.
How can people so generously compensated go broke so quickly?
Part of it has to do with youth, but many of the mistakes athletes make with the financial windfall of a professional sports salary also are made by regular people who suddenly come into large sums of money.
There's a lot we all can learn from their mistakes. When it comes to financial windfalls, it's best to know what to expect ahead of time so you can put the money to work for you instead of squandering it.
"Every single day, people come into large sums of money, whether it's a thousand dollars or a million, and without proper planning, funds quickly disappear," writes Jim Wang in U.S. News and World Report. "Just look at the horrible stories you often hear of lottery winners, and you'll have enough evidence that everyone needs a little preparation, even if you don't expect to get a windfall."
China Using Government Muscle to Turbo Charge its Auto Industry
Having already supplanted the United States as the world's largest auto market, China is on the fast track to becoming the global leader in hybrid and electric cars.
General Motors and Chrysler were forced into bankruptcy largely because they failed to pursue more fuel-efficient models. Indeed, GM and Chrysler looked wholly unprepared as gas prices soared over $4.00 a gallon in 2008.
As GM emerges from bankruptcy - having been bailed out by the U.S. government - it will put a renewed focus on alternative energy. Unfortunately, it's too late to make a difference. As U.S. car companies sputtered amid the country's economic collapse, carmakers in China raced ahead. And with billions of dollars in government backing, they are the companies that will set the pace for the global auto market.
The Airline Industry: How to Make Good Money From a Bad Business
After years of off-and-on conversation, UAL Corp.'s United Airlines (NASDAQ: UAUA) is getting into bed with Continental Airlines Inc. (NYSE: CAL) in a merger deal valued at $3.7 billion. The merged entity, keeping the "United" name, will be the largest airline in the world. It will have close to $30 billion in combined revenue, 700 aircraft, and service to 370 destinations in 59 countries, according to BusinessWeek. Early estimates predict savings to reach $1 billion to $1.2 billion annually.
By Collecting $533 Million in Fees, Lawyers Become Big Winners in Lehman Bros. Bankruptcy Case
Shareholders were the big losers when investment-banking giant Lehman Brothers Holdings Inc. (OTC: LEHMQ) collapsed in 2008.
Now, the bankruptcy lawyers are positioned to be the big winners. Lehman has already paid its bankruptcy advisers $533.5 million since September 2008, topping the half-a-billion-dollar mark in just 14 months, the investment-banking firm has revealed to the U.S. Bankruptcy Court in New York.
In mid-September 2008 - in one of its wildest and weirdest stretches ever - Wall Street entered a weekend awaiting a government bailout of Lehman Brothers and exited with Merrill Lynch & Co. Inc. agreeing to sell itself to Bank of America Corp. (NYSE: BAC) for nearly $50 billion, Money Morning reported. Lehman stunned investors by announcing it would seek bankruptcy in a bid to avoid a total liquidation after it was unable to find a buyer.
CIT Offers Debt Exchange, Draws Up Bankruptcy Plans
In what is being viewed as a last-ditch effort to avoid filing for protection from its creditors, commercial lender CIT Group Inc. (NYSE: CIT) is offering bondholders a debt exchange, while still preparing for a likely chapter 11 bankruptcy filing. CIT in July raised $3 billion from bondholders to keep afloat after it was denied [...]
Thornburg's Final Bid to Avoid Bankruptcy
By Jason Simpkins Associate Editor Thornburg Mortgage Inc. (TMA) said yesterday (Tuesday) that it would raise $1.35 billion through a private-placement deal to help keep the company in business and avoid bankruptcy. Thornburg, which caters to borrowers with strong credit, specializes in "jumbo" mortgages – loans that exceed $417,000. It avoided subprime loans, which have [...]