HOW TO GO FROM EARNING $100 MILLION A YEAR TO BANKRUPT

8/26/20147 Comments

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The best paid athlete on this green and warming planet of ours is a boxer by the name of Floyd Mayweather and he’ll be bankrupt within five years of retiring.

I want to be wrong, I really do want to be wrong, unfortunately that is highly unlikely as the bankrupt former top athlete is a cliché and the bankrupt world champion boxer is pretty much a rule set in stone.

First let’s just get a grip on how much Floyd “Money” Mayweather is earning so you can fully comprehend the downfall when you eventually do read about it. Oh and by the way, that nickname “Money”, I didn’t invent that one, it’s what he likes to call himself.

Charming fellow that he is, he does not hide his money, he flaunts it, lavishly and constantly. His whole image is based on showing large stacks of cash and all the trappings of wealth he spends it on; Houses, cars, jets, jewellery and so on and so forth (see video below at end of article)

For his last two fights he earned a combined $ 72 million, not bad for a year’s work. On top of that, with assorted sales of “The Money Team” knick-knacks and what-nots it is reported that his overall earnings for that year were over $100 million. Compare that to the likes of top tennis pro Novak Djokovic for example who earned a measly $ 33 million in comparison.

As for Mayweather’s career earnings, they are reported to be in excess of $350 million. Not bad for an illiterate kid who dropped out of high school to pursue a career in the Sweet Science. Make no mistake Mayweather is a phenomenally talented and hard working fighter, he’s earned every dollar, but you’re not interested in his pugilistic prowess are you? What you really want to know is how is he going to lose all that moolah.

It’s pretty simple, the main reasons for any major sports star losing their money is:

Business incompetence
Lawsuits
Gambling
Women
Cars
Entourage

Since I’m not writing a book on this subject let’s just concentrate on the big one, numero uno:

Business incompetence

Nothing drains an account like bad investments and poor money management, which is exactly where Mayweather has some previous form.

What follows is probably the most important tidbit of information regarding the myth around Money Mayweather and his business skills. It was widely reported in the boxing press at the time, but since it was the sporting media, no one really paid any attention to the financial details of it. So you’ll be the first to read about this. Here goes:

In February of 2007, according to ESPN, Mayweather bought a Maybach car for $528 000 (he likes cars, a lot! He has fleets of them) and he borrowed around $ 415 000 for this particular car at 16% annual interest from JP Morgan.

Nothing wrong with taking a loan, often it can be a prudent business move, even for the wealthy, but why is a man who has just earned $8 million dollars three months prior having to pay a ridiculously high annual interest rate of 16%? (As a comparison the prevailing Libor rate at the time was about 5.1%)

This tells you one of two things A) His business acumen and negotiating skills are non-existent or B) JP Morgan knew that he was a risky client and therefore it warranted the massive interest rate of 16% pa.

So what happened to the loan? “Money” Mayweather stopped paying the $9 000 monthly instalments for the car a year later and JP Morgan had to repossess the car, sell it for $196 000 and sue Mayweather.

Does this sound like a prudent and capable money man to you?

Wait, there’s more. You’ll like this.

In 2007 Mayweather retired from boxing, only to return 21 months later. Was it the draw of the ring and the accolades of the crowds that drew him back to the squared circle? Could be, but immediately after his very short retirement he started having money problems with the taxman. Big surprise that, eh? Puuuuuuuuure coincidence, right? Nothing to do with the IRS you understand. He was just coming out of retirement because of his love for the sport of boxing.

In June of 2007 Mayweather announced his retirement, in October of 2008 the IRS put a tax lien of $ 6.1 million on Floyd Mayweather for unpaid taxes in 2007. In May of 2009 it was announced that Mayweather would fight again (7 months after being slapped by the IRS lien). Nothing to do with the IRS you understand. He was just coming out of retirement because of his love for the sport of boxing.

Mayweather ended up forking over to the IRS over half of the $10 million that he made from his comeback fight which had nothing to do with the IRS you understand. He was just coming out of retirement because of his love for the sport of boxing.

Inflows and outflows in the sports world can be irregular, so a one off issue with the taxman is easy enough to understand, but prior to the $6 million tax ticket Mayweather received for 2007 he had failed to pay taxes on time in 2001, 2003, 2005 and 2006. If that wasn’t enough there have been rumours that he didn’t pay his 2009 taxes and was left owing $3.4 million.

I guess what I’m trying to ascertain is, does anyone else see a pattern here, or is it just me? The Money Team’s money management skills appear to be rather sub par.

There is one thing about Mayweather, you can’t fault him for is his ability to enjoy his money (while he still has some). This little video puts it all in perspective.

Enjoy.

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7 Comments
HAYDEN
8/26/2014 08:54:21 am
In the words of that inscrutable detective, Harry Who:
Amazing……….

Reply
BULINK
8/26/2014 06:19:14 pm
I think how this will play out is like all others before. He will lose eventually, but will make comeback after comeback trying to keep up with the bills. I don’t see a happy ending here.

Reply
INVESTASIANLINK
8/30/2014 03:15:17 am
To be honest, he sounds like the vast majority of professional athletes. They make millions per year and assume that they will make that for the rest of their life, without considering the fact that their current job is temporary and will be over once they reach the age of 40.

Reply
ELLINK
9/3/2014 11:14:08 pm
Yes I’ve read about many flashy folks losing it all and Floyd is at the top of list when compared to those individuals. The past info you found on him will predict the inevitable. One hope he has is that he recently had a meeting with Warren Buffett on how to invest, so maybe he has a chance to hold on to some of it.

Reply
SAGE CINCAIDLINK
2/11/2015 12:43:21 pm
This was an interesting article for me to come across because a bunch of my friends and I were just talking about the possibility of him losing his money, after I showed them some of the reckless things he was doing. It’s wild to imagine losing that amount of money for myself, being that my current spending habits are damn near nothing in comparison but I’m sure pulling in that sort of money has a serious effect on the way you think about things. This is case and point a solid showing of the importance of financial literacy.

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GHJGHBKN
4/27/2015 08:34:09 pm
The name you’ll start to hear when he goes bankrupt this time around: leonard ellerbee.. I’d never trust a black guy wearing a suit from a low tier college to manage my “business” you think tyson paying 80k for towels is crazy? Wait til floyd starts telling people what he paid for some stuff when He’s broke.. I hope he wins against pac man cuz if he loses, there will be a rematch, more $$

Reply
IAN WARDLINK
5/10/2015 03:15:20 pm
This article was really well researched. I’d love for the author to do a follow-up piece…and see if he can break down Floyd’s current spending habits, or any updates since his/her initial research.

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