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