We know all about the glory and success in the lives of Michael Jordan and Michael (Mike) Tyson. Whilst Jordan is regarded as one of the greatest basketball players of all time, Tyson is seen as one of the most formidable fighters of all time. Though their sporting careers had numerous glorious moments and unforgettable victories, their lives after retirement took entirely different routes.
Michael Jordan’s salary when playing 15 seasons for the Chicago Bulls totaled a whopping $100 Million. But this is nothing compared to the $400 Million made by Mike Tyson during his professional boxing career. By the time they both retired at the end of the early 2000s, Tyson was surely the richer star, particularly in terms of salary earned. What may shock you however, is that today, Michael Jordan is worth over $2.5 Billion, whereas Mike Tyson is worth only $15 million. Why did Jordan’s net worth grow by 2500%, whereas Tyson loose nearly 95% of his money? The answer is simple – money management practices.
Money management practices simply refer to the ways in which people handle money. Many of us have the problem of ‘too little money’ and often don’t know how to earn money to buy all the things that we want. With celebrities like Tyson and Jordan, the problem was of ‘too much money’ – they had so much money that they didn’t know what to do with it.
What did Tyson spend his money on?
He bought homes and vehicles he never used. Police would call him when members of his entourage were stopped for driving vehicles he had forgotten he had even purchased. He would take someone to a BMW or Mercedes dealer and buy every vehicle in the dealership just to display his wealth. He once picked up a jacket and discovered thousands of dollars in the pockets that he had previously forgotten about. His mansions had been used by strangers who enjoyed the luxuries he had bought. Numerous gifts, including exotic animals, expensive jewels, limos and designer clothing, were purchased for friends. Even strangers would receive Rolex watches from him if they complimented him in public.
He wasn’t all wasteful though. He made several investments too. He purchased many assets, bought stakes in various companies and even invested in a water park. But what he didn’t invest in was good financial education. He simply couldn’t tell apart a good and a bad investment. The companies he bought stakes in went bankrupt and the water park he put millions into shut down. So, without understanding what he was getting into, he let other people manage his money and make investments for him, many of whom were not qualified, such as the convicted former boxing promoter Don King, who embezzled and looted millions from financially uneducated boxers and athletes like Tyson. And all of a sudden, Tyson was $34 Million in debt and on the streets.
So, what did Michael Jordan do differently?
For starters, Jordan recognized the importance of building a source of income that would last him beyond his basketball career. For many of us, this source of lifelong income may be from buying properties and purchasing assets that are likely to appreciate and grow in the long run. But for Jordan (and many sports stars around the world), a great way of ensuring a lifelong income is to ‘build a brand’. Building a brand simply refers to leveraging fame and popularity to promote products such as clothing and other accessories. This usually works because people want to associate themselves with success and fame, and an easy way to do this is to buy products of people who are already successful and famous. For instance, many youngsters may buy products from cosmetic brands like SKIMS and Kylie Beauty in order to associate themselves with the lifestyle of the affluent Kardashian-Jenners. Likewise, Jordan leveraged his popularity to build arguably the world’s biggest shoe brand – the AIR JORDANS. Till this day, people want to associate themselves with the legacy and popularity of Michael Jordan and his Air Jordan shoes. More than 25 years from his retirement, Michael Jordan is making hundreds of millions simply because of the deals he has made with Nike for the Air Jordan Brand.
On top of that, Jordan bought several sports teams that became highly profitable for him, such as the NBA’s Charlotte Hornets and the MLB’s Miami Marlins. So, how did Jordan forsee all of this? Well, as it turns out, Jordan made wise financial decisions, invested his money in sound, robust deals and understood the foundations of business and money management.
No one is saying you need to be a business expert or a finance guru. All you need is a strong foundational understanding of money management principles and techniques. Whether you have the problem of ‘too much money’ or the problem of ‘too little money’, understanding the basics of investing and finance are key in shaping your future and deciding whether we end up as a ‘Jordan’ or a ‘Tyson’.