How To Not Go Broke After Hitting A Big Payday

Summary

Earn Your Leisure Podcast Summary
Episode: How To Not Go Broke After Hitting A Big Payday
Release Date: May 24, 2025
Hosts: Rashad Bilal and Troy Millings
Podcast Description: Earn Your Leisure offers behind-the-scenes financial insights into the entertainment and sports industries, highlights entrepreneurial backstories, breaks down business models, and examines the latest finance trends. It blends a college business class with pop culture for a unique perspective on the business world.

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Introduction

In the episode titled "How To Not Go Broke After Hitting A Big Payday," hosts Rashad Bilal and Troy Millings delve into the financial challenges faced by young athletes who receive substantial Name, Image, and Likeness (NIL) deals. The discussion emphasizes the importance of prudent financial management to prevent rapid wealth depletion commonly seen in the sports industry.

The Surge of NIL Deals in College Sports

Timestamp: 01:30

The conversation begins with Ian Jack introducing the topic of NIL deals, highlighting a recent example of a five-star basketball recruit transferring to St. John's, secured by a two-million-dollar NIL deal.

Ian:
"Captain Jack's coming to St. John's for two million dollars. They gave him a two million dollar NIL deal. He's making more money than anybody on the campus outside of Rick Patino. That's crazy."
(01:43)

This scenario underscores the growing financial opportunities for college athletes but also raises concerns about the potential for financial mismanagement.

Financial Steps to Preserve Wealth

Timestamp: 02:56 - 06:02

Eddie elaborates on investment strategies, advocating for disciplined saving and diversified investments.

Eddie:
"I would put half of the money away because he's already lit. A lot of times index funds. I would do half index funds and then probably half Microsoft and then Visa for sure. Of course Bitcoin if you can. Great."
(03:00)

He suggests allocating 50% of earnings into secure investments like index funds, technology stocks (e.g., Microsoft), financial sectors (e.g., Visa), and cryptocurrencies (e.g., Bitcoin). Eddie emphasizes the potential for significant returns over time, citing that a $500,000 investment could grow to approximately $8 million in nine years.

Eddie:
"If you put 500,000 into them, he's probably gonna make $8 million off of that by year nine. Easy, easy win."
(04:31)

The Pitfalls of Middlemen and Fee Structures

Timestamp: 06:03 - 13:26

The hosts discuss the detrimental impact of middlemen such as agents and street brokers who take substantial percentages of NIL earnings.

Ian:
"There are street agents that's brokering NIL deals and they're taking anywhere from 5 to 20% of NIL easily."
(04:34)

Eddie warns against allowing too many intermediaries who can collectively siphon off a significant portion of the athlete's income.

Eddie:
"Everyone's taking percentages. 4%, 5%, it adds up. Especially millions of dollars like you. Before you know it, 35 is out the door."
(11:46)

To mitigate this, the hosts recommend negotiating fees to the lowest possible and ensuring that business managers and financial advisors are on a salaried basis rather than commission-based.

Ian:
"You gotta put people on salary because then also when you put them on salary, it's tax deductible for you because you're paying them."
(12:53)

Deferred Income Annuities (DIA) as a Financial Tool

Timestamp: 07:18 - 10:05

Ian introduces the concept of Deferred Income Annuities (DIA) as a strategic financial tool to secure future income streams.

Ian:
"DIA is a deferred income annuity. So if you're getting a lump sum of money, especially when you're young, put a portion of that into a deal."
(07:20)

He cites Allen Iverson's Reebok deal as an example, where a structured DIA ensures a steady income in later years, mitigating the risk of depleting funds prematurely.

Ian:
"Iverson is going to receive from his Reebok deal $800,000 a year annually, and he will have access to 32 million at 55."
(09:37)

Tax Implications and the Need for Professional Guidance

Timestamp: 06:02 - 13:26

Derek points out the importance of understanding tax liabilities, especially when moving between states with different tax regulations.

Derek:
"There's a big difference in state tax when you leave from North Carolina to New York, especially when you're playing in New York City."
(06:02)

The hosts stress the necessity of having a Certified Public Accountant (CPA) to navigate complex tax scenarios, ensuring athletes maximize their earnings and comply with legal requirements.

Derek:
"Having somebody on your team, like a CPA that can explain that to you because yeah, it's a lot of money."
(06:34)

Lifestyle Management: Avoiding Excessive Spending

Timestamp: 09:36 - 14:47

A recurring theme is the temptation of lavish spending, such as purchasing expensive cars and properties, which can quickly drain earnings.

Eddie:
"Buying a Lamborghini that's $500,000 and you still got to pay taxes on the money. Then by the time you're 28, you're going to have multiple millions of dollars where even if you don't make it into the league, you're still going to be a multimillionaire."
(09:36)

The hosts advocate for a balanced approach, where a significant portion of earnings is invested, and discretionary spending is kept in check to ensure long-term financial security.

Real-World Examples and Case Studies

Timestamp: 10:05 - 15:30

The discussion includes real-world examples of athletes like Tim Duncan and Sebastian Thaler, who amassed considerable wealth but ended up with minimal savings due to poor financial management and the influence of entourages.

Eddie:
"There's a lot of people I've met that have made 30 and 40 and they have 2 million left. And everyone wants to blame it on entourage. No one ever talks about the financial syndicate."
(07:33)

Section also touches upon recent global financial concerns, referencing Japan's worsening financial situation compared to Greece, highlighting the interconnectedness of global markets.

Eddie:
"There are things on a chessboard financially, worldwide. The real world war is going to be the collapse that happens in all of the markets if we don't find a way to get along."
(15:00)

Importance of Comprehensive Financial Management

Timestamp: 13:26 - 15:41

The hosts emphasize that comprehensive financial management extends beyond mere investments. It involves structuring business entities (LLC, S Corp, C Corp), ensuring all financial relationships are transparent, and safeguarding against potential exploitation by those around the athlete.

Eddie:
"You may not have your IP secured because you're paying 20 different people percentages. By the time you look up in 10 to 15 years, you're paying 20 or 30 different people a bunch of percentages."
(13:26)

The conversation reinforces the need for athletes to master their financial game, surrounding themselves with trustworthy professionals who prioritize their financial well-being over personal gain.

Conclusions and Key Takeaways

Timestamp: 14:47 - End

The episode wraps up with a poignant reminder of the broader financial landscape and the imperative for athletes to adopt sound financial practices early on.

Eddie:
"Saving people from themselves is important. You have to set a plan in place that allows you to grow your wealth sustainably."
(10:20)

Key Takeaways:

1. Prioritize Saving and Investing: Allocate a significant portion of earnings into diversified investments to ensure long-term financial growth.
2. Limit Middlemen: Negotiate lower fees for agents and advisors, preferably employing salaried professionals to manage finances.
3. Utilize Financial Instruments: Consider Deferred Income Annuities (DIA) to secure future income streams.
4. Understand Tax Implications: Engage with a CPA to navigate complex tax scenarios, especially when earnings span multiple jurisdictions.
5. Manage Lifestyle Spending: Avoid excessive expenditures that can rapidly deplete wealth; focus on sustainable living standards.
6. Comprehensive Financial Management: Structure business entities appropriately and safeguard intellectual property and assets.
7. Long-Term Planning: Adopt a mindset focused on financial security beyond immediate earnings, ensuring stability regardless of career trajectory.

By adhering to these principles, young athletes can effectively manage their NIL earnings, securing financial stability and preventing the common pitfall of going broke after a big payday.

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This summary provides an overview of the key discussions and insights from the "How To Not Go Broke After Hitting A Big Payday" episode of the Earn Your Leisure podcast, offering valuable financial strategies for athletes and individuals receiving substantial windfalls.

Transcript

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[Ian]

But you know what's interesting? We haven't spoke about this too much on market Mondays, but it is a financial conversation. And I was at St. John's yesterday. So Ian Jack, Captain Jack back home.

[Derek]

So the X, what's up?

[Ian]

You know, he, he was somebody that actually was a five star recruit basketball and went to North Carolina and he's from the Bronx and he did one year in North Carolina and he's transferring it to St. John's the reason why I brought him up is that I'm at St. John's Y today. I'm just looking in St. John's a beautiful campus in Queens. And I'm just thinking to myself like, man, Captain Jack's coming to St. John's for two million dollars. They put two million dollars, gave him a two million dollar nil deal. I'm like, man, he's Making more money than anybody on the campus outside of Rick Patino. That's crazy. Yeah, that's a good point. You got a 19 year old sophomore that's coming on and I'm just looking at all of the prestigious buildings, all of the clergy, everything. And like I said, I mean Rick Latino's money. But after that you got a 19 year old if he's not the second highest paid individual on campus, he said he's at least top 10. So the next question that I have for that is for these kids that's getting nil money. The fight what financial steps should they be doing, them and their parents to make sure that they're not blowing this bag.

[Derek]

Once?

[Eddie]

It's always percentages for me. So it's not the percentage of money like for him specifically you got to put half of the money away because he's already lit like a lot of times index funds. I would do half index funds and then probably half Microsoft and then Visa for sure. Of course Bitcoin if you can. Great. But I think it's an easy win because especially just on Microsoft alone just own an open AI. Whether they choose to be bought out or they become public, I don't know if they'll allow that. But that probably I said at the top of the deck it's gonna be I think stock of the decade. And that's panning out to be true. So off, let's say if he put 500000 into them, he's probably gonna make $8 million off of that probably by year nine. Easy, easy win. Regardless of what happens, whether he goes to the league, what his contract situation is without like think of it as you get your same salary in the NBA or NFL without having to play more years. So you will spend 5, 600, 000 on a woman down the line trying to get out of a situation. Or you can put some of that capital in now and have it grow for you and you never have to worry about what's going on off the field. So yeah, I will put half away. So I will put a million away into. I was split up between Microsoft, VO third, Visa, fourth Bitcoin. Let it run. In nine years you should have eight or nine million dollars easily. And that's not even including the dividends.

[Ian]

And that's.

[Eddie]

And don't give all your money away to women.

[Ian]

And that's the link. And that's the thing too because it's like this is an important conversation because you know, I'm in the space. So what's happening now is that you have an agents that, that take their cut. But then there's like street agents. There was always street agents, but now there's street agents that's brokering nil deals and they, they're taking anywhere from 5 to 20% of nil easily. So parents is vitally important. Few things is. No, a middleman is never really needed. But if you do have a middleman, you got to negotiate that contract to as low as possible. And to the kids because you've seen a lot of kids that's driving Lamborghinis and, and all of these cars on campus. Like you said, invest your money. You getting $3 million, you're buying a Lamborghini that's $500,000 and you still got to pay taxes on the money. Then like, so I get it, you're 18. But like you said, if you put that money into an investment in a relatively short period of time. Yeah. By the time you 28, not even 30, by the time you're 28, you're going to have multiple millions of dollars where even if you don't make it into the league, you're still going to be a multi millionaire and you should be set for the rest of your life. If done correctly like this. Nil money is. Is to the point now like if done correctly, but you don't even got to go to the league. You can be real for the rest of your life just based off of decisions that you make from nil money when you're 18, 19 years old. Yeah.

[Eddie]

And it helps. Go ahead.

[Derek]

I'm saying we got to take into account that he's not coming from like any school. Like he was at North Carolina where he had nil money as well. But there's a big difference in state tax when you leave from North Carolina to New York, especially when you're playing in New York City. And so having somebody on your team, like a CPA that can explain that to you because yeah, it's a lot of money and this is a hometown kid. This is like, you know what I mean? Like, I think the best advice on top of everything that you said is that you got to realize everybody can't come with you on this journey.

[Eddie]

And on top of that, there's a lot of conversations. Shout out to Red Panda Sports turning players and owners one game at a time. Y y the politics of the business that you're in the NBA, NFL. That's why the investment part is so important. There's no reason because it's not talked about there is a system for you to get those big contracts and for people to steal that money away from you. Tim Duncan comes to mind. I'm glad, glad KG recovered. Sebastian Tailare comes to mind. Like, there's a lot of people I've met that have made 30 and 40 and they have 2 million left. And everyone wants to blame it on Entourage. No one ever talks about the financial syndicate. That is an entourage that takes all the money away.

[Derek]

It's fair. That's a fact.

[Eddie]

Everyone like, yo, if y' all quit hanging with 20 people, what about the 20 financial people that's on the team that is feeing you to death 2 to 3% of the time? 2 to 3% with 20 people adds up.

[Ian]

That is a fact.

[Derek]

That's a fact.

[Ian]

That's a fact. And the thing about. I'm gonna give you guys some game outside of the usual conversation that we speak about on Market Mondays. DIA A DIA is a deferred income annuity. So if you're getting money, if you're getting a lump sum of money, especially when you're young, put a portion of that into a deal. Because what that does is that grows over the course of time, then you take income from it. So like Allen Iverson, right. Everybody always talks about like his legendary deal that he did with Reebok and how he's going to be getting like, I think next, maybe he started this year when he turns, when he turns 50.

[Derek]

50.

[Ian]

Yeah, yeah, he'll probably be 50 soon. But whenever he turns 50, he gets like a million dollars a year for the rest of his life. That's because when he structured that, the first deal he had, yeah, a good advisor, somebody on it on the team that actually said, okay, we're gonna put a portion of this away into the D so you can't spend it. Obviously, you know, people, you know, he had spending habits. So they, it's forced savings that grew over the course of time. And now let's say you put a million dollars in and you wait till you're 40 years old, that million dollars is going to be $10 million right now. You draw income off of that 10 million for the rest of your life. Bobby Bonilla, A lot of these sports contracts, that lump sum was put into an annuity that grew over the course of time. Tax deferred, by the way. And then now that provides a lifetime income. And depending on what type of annuity it is, you can actually have some guarantees on it. So it's like an insurance based product. So it, it's it's not as risky as just having it in the stock market. So that's something that it. Like I said, if you win, if you hit the lottery, if you have a lawsuit, if you. Again, nil. Money, sports, any lump sum, any. Any type of thing where you get a lump sum at a relatively young age. I would definitely, at the very least, look into it, educate yourself on a diagram. DIA Deferred income Annuity that you can put money into, and you can draw income down the line.

[Side Hustle Show Host]

Yeah.

[Derek]

So Iverson is going to receive from his Reebok deal $800,000 a year annually, and he will have access to 32 million at 55. So he's 49 now. So when he's 55, he'll have access to that 32 million.

[Ian]

And then some people be like, well, I don't. Well, I want my money right now. It's a porch. Like, you gotta have portions. You gotta layer it. Layer it, Layer it out. Look, nobody's gonna be mad at saying, okay, I got 30 million waiting for me in 15 years.

[Eddie]

Yeah.

[Derek]

Look, I mean, a good case study would. If you watch sports and study sports, look at what the Los Angeles Dodgers have done.

[Eddie]

Yep.

[Derek]

Deferring contract. Shohei Otani. Deferred 700. 600 million. 650 million. Deferred.

[Ian]

You gotta say sometimes in life, you guys save people from themselves, I guess, for sure. Disrespect to Alan Iverson. He's one of the greatest that ever did it. But of course he has financial problems. Right. Like, you go through a divorce and then you have issues that come, and it's just like you get money at a young age, and sometimes as an advisor or as a parent, you have to save people from themselves. That's important.

[Eddie]

Or the team that is put around them to take all the money away. Like, I would love to see from the time he was drafted in 96 to when they went to the finals, what if the value of the 76ers increase and then how much he made in Jersey sales? Because if I don't put a plan in place that and I allow you to go. Everyone doesn't operate as a fiduciary, but there's a lot of teams that profit from the destruction of athlete. Of course not talked about.

[Ian]

Yeah.

[Derek]

And they're gonna leech off of them until it's the next athlete.

[Ian]

Yep.

[Derek]

And then rinse and repeat year after year, decade after decade, and then some more.

[Ian]

Game for you is that if you have a business manager, so there's a few different things here. There's the agent who works out contracts, stuff like that. Then there's a business manager who is actually more on the financial side. Right, the business manager. It would be better to have them on salary as opposed to them getting percentages of the percentage.

[Eddie]

Hello, hold on, saying it again. That's the gym of the day. It's gonna save you millions.

[Ian]

Facts, you gotta put them on salary. Yeah, and that's something that even Steve Harvey spoke about on his conversation with us because you got, especially in Hollywood now, going to Hollywood, you got an agent, you got a business manager, you got the talent manager, you got the financial advisor, lawyer, cpa, you got. And all these people are taking percentages. And it might, it might seem small, but 4%, 5%, it adds up. Especially millions of dollars like you. Before you know it, 35 is out the door. That's before taxes. Now you gotta take taxes. So now you, you've given away 60, 70 of your money. Now you understand why people can actually go broke. 30 of your money is going to tax. 35 of your money is going to taxes. Then you got 30 going to all of these other people that I just named. Then we're not even talking about all the lifestyle as far as, you know, your cars, your house. Then you got, you know, child support, you got all of these things. Now before you know it, you, you're in the red.

[Eddie]

So you may not have your ip.

[Derek]

Exactly.

[Ian]

So it's better, yeah. If you can put people on salary because then also when you put them on salary, it's tax, it's tax deductible for you because you're paying them. Make sure that they, they fill out their, their W9 forms. Right now you're paying them as a employee, independent contractor, however you set it up. But now that's, that's tax deductible to you as a business entity. Set up, set up your business entity, your llc, your S corp, your C corp. You know, you got to do it. You just can't go into this just thinking that you just. Talent. That's how you're going to get taken advantage of.

[Derek]

There we go.

[Eddie]

Yeah. And money. Master the game. One of the things that had a great impact on me was the fee structure that if you have other people invest for you. Right. But no one talks about it on the talent or entertainment side of business side like I am. Great point Rashad made. To put everybody on salary. Because even if you're starting out as a beginner entrepreneur and you're saying, hey, do this Business with me, you get 50%, I get 50%. It's a recipe for disaster. You have to count up all the fees and percentages that you're paying in the if you're an artist, tour manager. And then also too like even, let's say for us, you may have to enter a deal with somebody. Then they don't even want to give you your data. Like it's theft across the board. And then they'll say, well, you're tough to work with. No, I don't want to be robbed. No, you're gonna take 20 and I don't get my data and no, then you're gonna cross collateralize what I built with something. Be mindful because you'll look up in 10 to 15 years and you'll be paying 20 or 30 different people a bunch of percentages. And if you're averaging 12 or 15 return, you're in a negative. So.

[Ian]

But that's all I got to say about that. You haven't. That's a, that's a million dollars worth of game for you for sure.

[Eddie]

And breaking news last night. The Japanese Prime Minister Isaba says Japan's financial situation is worse than the Greece situation. Scary times.

[Derek]

The Greek situation from two. Oh, wow.

[Eddie]

Yes. No one saying a word.

[Derek]

Wow.

[Eddie]

Like there's things on a chessboard financially, worldwide. I forgot who said it, but there was like for all parties involved, India, the United States, China. It is best for us to all get along because the real world war is going to be like the collapse that happens in all of the markets if we don't find a way to get along. We need each other and I like each other.

[Ian]

Can we all just get along for real? Reginald Denny said that. No. Was that right? Rest in peace.

[Derek]

Rest in peace. To Rodney King.

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