‘In real life, a lot of that pie is gone’: Former NBA star Lou Williams explains why players ‘go broke’ within 5 years — breaks down how $5M shrinks fast after costs. What you can learn

Financial drains

According to Williams, some of the biggest expenses for a millionaire athlete can’t be easily avoided. Taxes, for instance, take nearly half the player’s salary he says, while union dues to the National Basketball Players Association (NBPA) and fees paid out to agents and money managers could leave the player with less than half of their initial payment.

“Before you look up, you’re probably at $1.5 million off of $5 million, with nothing!” he says. To be fair, $1.5 million isn’t “nothing” but it is quickly drained by an athlete’s desire to live up to the headlines. “These Benzes we keep talking about and these mansions and s—, these girlfriends and these Chanel bags … before you know it, you’re not a millionaire any more. You’re a high thousandaire.”

Most Americans might never see a seven-figure payout, but are still faced with similar financial drains. The average single American worker faced a net average tax rate of 24.2% in 2023, which is roughly in line with the OECD average of 24.9%, according to the intergovernmental organization’s data. Coupled with the high costs of living and rampant consumerism, 30% of Americans claim they’re living paycheck-to-paycheck while another 26% say they spend nearly 95% of their income, according to a CNBC report.

One of the best ways to plug a hole in a leaky budget is to come up with a better (more realistic) financial plan going forward.

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Better budgeting

It’s one thing to have a budget, but it’s another to actually follow one. While 90% of those surveyed by Debt.org said they had a budget, given how many households are still struggling, many could stand to find a better way to budget.

One way to improve your budget is to set strict limits on how much you’re willing to spend on each category. While you can’t avoid monthly expenses like home and auto insurance, there’s always a chance you could find a better rate — and every little bit helps when it comes to plugging these financial drains.

Then comes the hard part — staying consistent. Some people prefer the “cash-stuffing method,” a technique popularized on TikTok that involves using envelopes and cash to better visualize how much you’re spending.

While you’re still getting a sense of how much things actually cost you, you may consider adding a little buffer to your budget. Like, say, when you buy a car or estimate the total of your weekly groceries, always assume things might cost 5% to 10% more than you anticipate. This kind of thinking can help you adjust for unexpected expenses and limits the risk of going over your original budget.

These simple tricks could help you keep more of your hard-earned income every month to build a financial safety net for you and your family.