Mirkine says he once turned away a veteran basketball professional, playing on a three-year, $30 million contract, who refused to consider going on a budget and following a reasonable financial plan. The athlete had been either denied a mortgage or offered one only at a very high interest rate because he had an abysmal credit score due to his spending, which included multiple houses and cars, expensive jewelry and three child-support payments.
"I said, 'Let's clean your act up, then we'll tackle the mortgage,'" Mirkine recalls. "He didn't want to hear it. He just wanted a loan."
Mag Black-Scott, president and CEO of Beverly Hills Wealth Management, says many athletes and entertainers do not understand even the basic principles of money management.
"I know a football player who got a huge contract and went on a spending spree: He bought his mother a house and himself a house; he bought cars; he bought the bling stuff. So when his contract was not renewed, he still had the houses and the property taxes to pay and, as he said to me, 'Nobody told me this could happen,'" says Black-Scott. "This is, unfortunately, a more common scenario than you would like to think."
That's one reason why the list of athletes and entertainers who have earned millions but wound up bankrupt is so long. According to reports, boxer Mike Tyson, basketball player Sheryl Swoopes and baseball's Len Dykstra have all had financial difficulties, sometimes coupled with legal problems as well. Singers Cyndi Lauper and Jerry Lee Lewis and actors Burt Reynolds and Kim Basinger all reportedly declared bankruptcy. And at the time of his death in 2009, pop superstar Michael Jackson was said to have been hundreds of millions of dollars in debt.
Sometimes celebrities can be victimized by unscrupulous advisors like Bernard Madoff. This past January, former National Basketball Association star Vin Baker sued his financial advisor for mismanagement. In 1999, Baker signed an $87 million, seven-year contract with the Seattle SuperSonics. Less than a decade later, he lost both his home and business in Connecticut to foreclosure. He has meanwhile struggled with alcoholism, he says.
But even though other parties are sometimes to blame, advisors say clients have to take responsibility by monitoring their investments and not simply trusting their handlers.
"There are one or two super-wealthy celebrities who truly go through their books, line by line, once or twice a year," says Black-Scott. "That's great. No one watches your money as well as you would."
But frequent travel and busy schedules mean some athletes and entertainers don't pay their credit card bills on time, much less read their financial statements.
According to Cole, a quarter of those players with careers of three years or less wind up bankrupt within a year of retirement. More than three-quarters of those who play more than three years are bankrupt, divorced or unemployed two years after they stop playing. Several news outlets have reported that 60% of NBA players will go bankrupt within five years after retiring.