Why Cash Flow is Better than Big Salaries: An Example from the NFL

This is a guest post by Passive Income Dude at www.passiveincomedude.blogspot.com

I don’t have millions of dollars of cash.  In fact, I’ve probably never seen more than a few hundred dollars of cash together at one time.

But I imagine this picture to the left is close to what MILLIONS OF DOLLARS OF CASH looks like.

Pretty cool.  I’d love to somehow receive a giant lump sum of cash all at one point one day and turn it into wads of bills like this.  I’m sure we all would.  But consider what I just read the other day:


Did anyone miss that?

78% of NFL players go broke within three years of retirement?  That seems ridiculously high.  And almost 16% file for bankruptcy at some point in the future?  How can that be? Again I ask, how can that be?  And here is specifically why I ask the question “how can that be”:

The LOWEST annual salary allowed by the league in the NFL in 2016 is $435,000.  Divide that by twelve, and you get $36,250 PER MONTH!!!!!  How is it possible to go broke within three years of NFL retirement, if you were making close to $36K per month for over three years(!) as an NFL player?

That means that if you were the lowest paid player in the league EACH YEAR for the average NFL career of 3.3 years, you amassed $1,435,500 in salary alone during three years playing.  Sure there are taxes, agent costs, etc, but I imagine that you may have done some endorsements or commercials or something to increase your earnings and offset taxes.  Or maybe you played longer than 3.3 years. Or, hey, maybe you didn’t do any of those things.  Buy maybe you also weren’t paid at the league minimum for three years either.  Chances are you most likely came out close to at least $1.45 million or more over your career.  MY POINT IS THAT EVEN THOSE AT THE BOTTOM OF THE SALARY CAP for an average length of NFL career still most likely amassed over 7 figures, before they retired.

So with that the question remains – how are 78% broke after three years in retirement? How can that be? Again I ask, how can that be?

I would venture to guess it is solely because of two primary reasons:

1) A lack of assets that produce cash flow.

2) Expensive living.

I would bet that the vast, vast majority of explanations for those 78% of ‘broke’ players can be most likely boiled down to the two reasons listed above.  1) If you are not acquiring assets that produce cash flow, and 2) if you are living a very expensive lifestyle, you can easily go broke several years after your large salary suddenly stops.

And this is why the magnitude of your salary is not important.  Please hear me: The hidden lesson in the above example is exactly why people with very small salaries can achieve FI while the large majority of NFL players cannot.  This is why we bloggers and readers are inspired by DividendMantra, and Mr. Money Mustache, and A Frugal Family’s Journey, etc.  These individuals do not (or did not) make $36,000 a month, yet they are all able to have secure financial futures.

And once again it comes down to two little things, which happen to be the exact opposite of the two reasons listed above.  They:

1) Have assets that produce cash flow.

2) Live frugally.

The beauty and the frustrating thing about FI (financial independence) is that it really is that simple. And this simplicity is why I say often around my site and in my comments that IT IS YOUR SYSTEM THAT IS IMPORTANT. Not your salary.  If you have a system that is moving you in the right direction of 1) acquiring assets that produce cash flow and 2) keeps you living frugally, then who cares if you have a small salary?  You are much better off in the long run than the NFL player who is ignoring these principles.

So stay motivated, do not look to your left and your right at those with large incomes, and ensure your system of honoring the two principles above is intact.  Your success is almost guaranteed if you do.

In closing, remember that this:


is more powerful than this:


Always remember cash flow is more important than large salaries!

What do you think?

If you would like more investing commentary and insights, please visit Passive Income Dude at www.passiveincomedude.blogspot.com where I share my journey to financial freedom through my own disciplined dividend and real estate investing.  Thanks for reading!

Passive Income Dude


11 thoughts on “Why Cash Flow is Better than Big Salaries: An Example from the NFL

  1. Great post and reminder! So important to save more than you spend. If you can save 50% (or more) of what you make and invest it wisely, you can build up a nice income stream over time. Its sad that so many pro sports players (NFL, etc) end up being bankrupt.

    • When it comes to personal finance, it doesnt get simpler than that — spend less than you make and save/invest the rest. Most people tend to forget it and think that the good times will never end.


  2. Good article.
    These guys live exavorant lifestyles. Friends and family ask for money. The NFL has done a better job in recent years and at the rookie symposium they have financial planning classes.
    Now imagine if schools in junior high or middle school started with financial planning how much better off people would be

    • Isnt that the most depressing thing ever? It boggles my mind that we have a system that doesnt teach these basic life necessities in school. Gotta keep them ignorant right? How else are you going to milk the general population.


  3. I counted the money in that photo and I BELIEVE it’s roughly $1.2 million. It’s a bit hard to tell and I think there may be more.

    But yes, I agree that cash flow will ALWAYS be better than cash. And multiple streams of passive income will always be better than one salary. It’s why I only invest in assets which produce income. Capital gains and property appreciation are much less appealing to me than dividends and rental income. I’m trying to replace my salary with dividends, rental income, blog income, royalty payments, and the like. It’s slow going.

    It amazes me how these NFL players can have such poor money management and self control that they blow through that money so fast. I mean, there’s spending money on fancy things you can’t afford, but this goes so well and beyond that. It’s almost like you’d have to have bankruptcy as the end goal to achieve the financial fall that these guys take. Talk about fumbling the ball on the 1 yard line.

    ARB–Angry Retail Banker

  4. It boggles my mind how quickly they burn through their money and spending as though they’ll be earning those amounts for the rest of their lives, not treating it as a spread-over-years windfall.

    The ones that have a good head/advisor make it through!


  5. cannew says:

    Probably most don’t know that a good portion of their earnings goes to taxes, then agent and as mentioned given away to family members. Then their spending, even if not excessive, probably doesn’t leave much for savings.
    Average life span of 3.3 years doesn’t give them any time to accumulate or save much other than a house or condo and lots of clothes. And we are talking about kids 19 to 23.

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