This week I wanted to share two stories with you. While they might not be relatable to the average person like you and me I do think they are extremely interesting. When you think of a multimillionaire athlete, what sort of spending do you think of? Most people would probably say giant mansions, expensive cars, designer clothes, and excessive spending. Or maybe you’ve watched the ESPN 30 for 30 special ‘Broke‘ (recommend by the way – check it out on Netflix) detailing how athletes made ridiculous investments, blew their money gambling, or just had bad luck? This first story I read focuses on hockey player Jack Johnson who put all his faith in the people he trusted the most, but came away with nothing.
According to the article, Johnson has earned $18 million over the course of his career and is set to make another $5 million this year and the next 4 years which is confirmed here. That’s a huge chunk of change and easy to retire on even with the lifestyle expectations of a pro athlete. The problem here is that Johnson currently has none of that $18 million now. Johnson originally had an agent to handle his finances, but dismissed that agent in favor of granting power of attorney and full control of his finances over to his parents.
His mom then decided to borrow almost $15 million in his name against his future earnings, taking out multiple high interest loans. The first thought that comes to my mind is if you are making that much money, why the heck would you even need loans?! And the second thing is that even if you did need to, in the current market the interest rates for most things should be low with that sort of income!
His parents took out loans out $1.5 million and over $2 million both at interest rates of 12%, way over what was market value at the time for mortgages. Jack had thought his parents had purchased these homes at much lower prices. He also thought that his parents had used an inheritance to pay for the majority of the one property. The high interest rate was probably due to the fact that his parents were trying to hide the true amount of money from their son. Shame on these lenders for even offering these predatory loans in the first place as well! He had tried questioning his parents about his finances several times as he received calls from debt collectors. Each time his parents always told him not to worry and focus on playing hockey.
Jack Johnson now claims to have less than $50,000 to his name and over $10 million in debt as he now files for bankruptcy. His wages were garnished up to $41,800 per paycheck before he had filed for bankruptcy! The article claims that he is frugal and his only “splurge” after getting into the NHL was purchasing a Ferrari. Even if we take this as a warning sign that he is not frugal (the article also mentions he drove a BMW to court) I highly doubt that he would have been able to blow through $15 million in 7 years. I feel like you have to try to blow through that much money, but it seems that his parents succeeded in doing just that.
Johnson is currently 27, so he is still young and does have time to recover especially as an athlete. You do have to remember that the average NHLer will only play 5-6 seasons before retirement and most will retire before the age of 30! Johnson has the advantage of being a high draft pick and an above average player, so it is more likely that he will have a few more years if he can stay healthy. It’s rare for most players to play past the age of 35 so when you only have 10-15 years worth of earnings it’s important to maximize those earnings. It truly is a shame to see that earning potential go to waste from what Jack Johnson thought was a wise decision.
The fallout from this is that Jack Johnson has completely cut off contact from his parents. He stated that it would be easier for him to climb his way out of bankruptcy as opposed to repairing that relationship. I’ve got to say that I don’t have children, but I don’t think that all the money in the world would lead me to betray my own parents like that. Isn’t there a point where enough is enough? His parents could have lived comfortably the rest of their lives. Now they might end up with nothing and be without their son. Even if they do manage keep all this “stuff”, that “stuff” will never be able to repair the relationship and trust that they broke. Please remember to check out the original article here for all the details on this heartbreaking story.
So how many of you thought about the title was about the musician and never heard of the hockey player? Who do you trust with your finances?