Dropping the money ball: Why some athletes go from riches to rags on retirement

(L-R) Elijah Motonei Managoi of Kenya, silver medal, his compatriot Asbel Kiprop, gold medal, and Morocco's Abdalaati Iguider, bronze medal, pose on the podium after the men's 1500m event during the 15th IAAF World Championships at the National Stadium in Beijing, China, August 30, 2015. REUTERS

NAIROBI: He has won the IAAF World Cross Country Championships. At the height of his career, he won millions of Kenyans’ hearts with his skills on the track. For his triumphs, he also won himself millions of shillings in prize money.

But those were the good, old days. Today, these memories bring tears to Paul’s eyes.

Paul, whose real name he asked that we do not use, is today a pale shadow of his former self.

The vagaries of life have stripped him of his athletic frame. He has nothing left of his illustrious career, save for his memories and a large house and a couple of buildings.

Paul tries to forget his fall from grace by drowning himself in alcohol, and is often spotted stumbling out of chang’aa dens.

More recently, Kenya was the overall winner at the just-concluded IAAF World Championships in Beijing, China, after the country’s athletes scooped seven gold, six silver and three bronze medals. Each gold medallist received a haul of Sh6.2 million.

And while as a nation we take pride in their victories, little thought is given to what the athletes are going to do with their bounty. The winners of today could easily turn into Pauls in a few years.

As it is, Kenya’s athletic landscape is peppered with national heroes who fell into financial trouble right after retirement.

Sometimes, this fate is not necessarily the result of extravagance or financial miscalculations. Even those athletes who appear to be well-grounded financially have fallen victim to retirement — a fact that gives some of the current crop of athletes sleepless nights.

Patrick Makau once held the world marathon record with a time of 2:03:38 hours set in Berlin in 2011. He believes he has prepared himself well for retirement by “putting into good use” about 80 to 90 per cent of his earnings.

Mr Makau refused to disclose how much he has earned on average, but describes it as “some good cash.”

Still, he is a worried man because he knows of an athlete or two who despite putting their millions of shillings into good use still slid into bankruptcy after retirement.

“I don’t understand it,” he told Business Beat.

“You see someone who was getting millions, and even investing some of that cash. And then when he retires, it does not take long before he loses all that money. The guy gets so broke that he begins to sell off his investments for hard cash. Sometimes I fear that such a thing might happen to me as well.”

The athletes and coaches we spoke to said that often, athletes forget that retirement is an entirely different ball game from their active days when they would go home with millions of shillings after winning races, making an appearance and from endorsement fees.

The lavish lifestyles they lead during their cash-rich active years cannot be sustained by the comparatively small income they get on retirement.

Most athletes we spoke to lack information on the available investment options and tend to either waste their money on lavish spending, or put their money in areas where their colleagues have also invested, irrespective of viability.

Most athletes have invested in housing and land.

“I do not get some special financial advice. You are chatting with a friend over a cup of coffee and he suggests to you that a certain investment is good and then you go for it. That is how I reach my decisions,” Makau said.

He added that most sports personalities want to invest in areas that do not take up too much of their time, because “our job is running, not managing other businesses”.

PRIZE MONEY

Mathew Kipkoech Kisorio is a long-distance athlete with a half marathon best of 58:46 minutes (among the world’s top five best times for the distance), and a marathon best of 2:10:58 hours. He has won the Philadelphia Half Marathon, Kagawa Marugame Half Marathon and Stramilano races.

In the early years of his career, he admits to having wasted his money, especially between 2007 and 2009.

“I did not have anyone to advice me on how to use my money wisely,” he said.

Dr George Njenga, the dean of the Strathmore Business School, has previously said that he does not think acquisition of land or buildings is the best investment decision.

“So many people invest in pieces of land throughout their professional life or income-generating life, with the idea that they will generate future returns on these plots. Unfortunately, only very few know the real estate business and end up losing the opportunity to invest their money better because it is tied in land and other physical assets,” he said.

What athletes get from these investments is a small fraction of the prize money they get for participating in international races.

From interviews with them, a seasoned athlete can expect a minimum of Sh1 million a month.

One of the athletes revealed that he earned 500,000 euros (Sh58 million) in just over two hours after a marathon he participated in in Europe. This is aside from appearance fees.

“Most of us grew up in poverty, admiring the good life. So when we get the money, we spend it on some of the things we grew up admiring,” said David Marus, a 34-year-old marathon athlete who has carved a niche for himself in the Leiden marathon in the Netherlands.

Benjamin Limo, a former middle and long-distance runner, agreed that athletes have been spending money without proper planning.

“We lack information and that is why some of us get a lot of money but do not spend it wisely,” he said in a telephone interview.

FINANCIAL LITERACY

But the young and upcoming athletes appear determined to change the narrative.

Geoffrey Kipyego is a 27-year-old athlete from Iten. When we met him, he had just attended a financial literacy training workshop for athletes organised by UAP Insurance and Faulu Microfinance Bank.

Mr Kipyego was in the company of about 100 other young athletes from the town famed for producing some of Kenya’s finest runners.

His attendance, just as with for the others, was pegged on the optimistic view that when his big break comes, he would be equipped to put his bounty to good use.

Kipyego has grown up seeing some older athletes pale into obscurity a few years after hitting the jackpot.

“I have seen some athletes who have used their money wisely and some who have not. Those who didn’t use their money well have suffered and lost hope in life. Now I see them drinking themselves silly,” he said.

Bankruptcy after retirement is not the preserve of athletics; it is a stain that runs across the sports fabric.

Earlier this year, Kenyans were exposed to the despair sports stars face when they go from dining and wining with kings to begging for food. Maurice Odumbe, a former captain of the national cricket team, shed tears on live TV when describing his life of squalor earlier this year.

The English Premier, despite its glitz, also spews out bankrupt players soon after retirement.

The BBC cited a report that showed the popular English soccer league — where a player’s weekly average wage is almost twice the average annual wage in Britain — is no exception to extreme financial lows. According to sporting charity XPro, one in five Premier League footballers face bankruptcy within five years after retiring.

According to the report, it all boils down to bad advice.

Many players get into certain investments “without knowing what they are ploughing their cash into”. The players often invest in depreciating assets like watches, or give money to friends expecting a future payoff.

Although one does not necessarily need to be literate to make sound financial decisions, illiteracy among many of the athletes has played a major role in exacerbating the situation.

Mr Marus said most athletes, for one reason or another, did not go to school.

“When they go to banks and the bank official starts speaking to them in English, they get scared,” he said, adding that this is when some opt to put their money under a mattress.

Marus, himself a university graduate, recalled a question that was asked by one of the young athletes at the UAP/Faulu financial training.

When one of the speakers told the group of athletes that they could save money with his institution, and that the money would then earn an interest after some time, one of them wondered who would have to lose out so that he could gain.

“That is how serious things are here,” said Marus, adding that this lack of information has seen some athletes pour millions of shillings into financial consultancy.

Few Kenyans may have heard of Isaac Macharia, yet, he easily qualifies to be described as one of the athletes doing really well.

He is a graduate of Jomo Kenyatta University of Agriculture and Technology (JKUAT) and paid for his education using money he got from running.

The first time he won a cash prize, he paid his school fees, and by the time he started raking in millions of shillings, he was able to invest most of the cash in real estate, the stock market and other areas. He has also educated all his nine siblings to university, and started a high school in Ngong, which has a charity wing.

Mr Macharia also imports cars, which gives him a supply of hard cash.

“I now advice my fellow athletes to diversify their investments,” he said.

“Invest in capital assets for the long-term, and non-capital assets for daily sustenance. It does not make sense to have an investment that you cannot easily convert into cash when all you need is money for dinner.”

The need to equip athletes with financial planning skills is clear. UAP and Faulu said for them, it not only makes good business sense, but is also a way of empowering the people who have ensured Kenya’s national anthem is sang in foreign lands.

Sam Aduke, an agency training and development manager at UAP, said the objective of the training is teach financial management skills.

“We have seen athletes get money, and because the money is good and comes abruptly, they get into lifestyles that literally erode the money,” he said, blaming this on a lack of knowledge on investment and savings options.

PRUDENT MANAGEMENT

Athletics is a short-lived career and calls for prudent financial management. Further, the athletes we spoke to said it takes between three and eight years for most runners to get their big break.

“No one is making efforts to prepare our athletes for potential stardom,” said Mr Aduke.

The sudden change from having nothing to “swimming in money is to some a curse”, he added, “unless there is someone to tell them to keep their heads”.

“A friend was telling me that an athlete can negotiate the price of a house and promise to pay for it later after participating in an upcoming race,” said George Simiyu, an assistant manager at Faulu Microfinance.

“They earn millions, but the money goes to clearing debts.”

The challenge among athletes, according to Lawi Masibo, a Faulu branch manager at Kabarnet, is planning for uncertainty.

“For an athlete, it is about health. An athlete might get an accident or get sick, and that could easily mean the end of his or her career.”

Wilson Kipsang, a two-time winner of the London Marathon, owns the resort that hosted the financial training. The name he gave it, Keellu, points to a man who understands the nature of his talent. Keellu is a Kalenjin term that loosely translates to ‘something you have got by chance’. If only athletes like Paul had the same kind of understanding.

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