You don’t understand how quickly it’s going to come. You don’t understand the management of it. It’s really monopoly money when you go from getting a $500 (monthly) stipend in college to hundreds of thousands of dollars. – Richard Jefferson

SALT LAKE CITY — Utah Jazz star Alphonso Clark Burke III, better known as Trey Burke, grew up in an average, middle-class family in "Middle America." Born and raised in Columbus, Ohio, he describes his family life as fairly unremarkable.

His father, Alphonso Jr., who goes by Benji, and his mother, Ronda, were both professionals who provided a comfortable, “normal” life for their three children.

Benji said he worked hard to encourage discipline in his son when it comes to money, which, he admitted, was challenging considering the mindset of a young person who suddenly finds himself with a multimillion-dollar sports contract.

“For most 21-year-olds, this money is not real to them,” Benji said. “All he knows is that every two weeks, he gets a certain amount and I can spend a certain amount.”

Not everyone is equipped to handle the sudden responsibility of great wealth.

A Sports Illustrated article reported that 78 percent of NFL players face bankruptcy or serious financial stress within just two years of leaving the game and 60 percent of NBA players face similar circumstances five years after retirement.

And an ESPN documentary entitled “Broke” chronicled the disastrous financial meltdowns of many high-profile athletes who lost all of their millions through ill-advised investments, out-of-control spending and freeloading hangers-on.

The elder Burke said that learning the discipline of smart money management is an ongoing process for his NBA star son, as it would be with most young adults. Since joining the league, Trey has reached out to a few veteran players such as Los Angeles Clippers star Chris Paul to get guidance on how to lay a strong financial foundation for long-term stability.

What is revealed is that the lessons for the rich are the same lessons for those with fewer resources: “Once you get the good habits, then the rest is easy,” Benji said. “You have to (develop) the good habits now while you’re a rookie.”

A veteran's perspective

Being fiscally responsible can be a difficult lesson for a newly minted millionaire to comprehend. Just ask Jazz teammate and 13-year NBA veteran Richard Jefferson, 33, who has made tens of millions of dollars during his tenure in the league.

Jefferson grew up in a working class family in the Phoenix area, with his mother, stepfather and two other brothers. Coming from a humble background, he admits he wasn’t ready for the instant economic change that comes with that first NBA contract.

“You don’t understand how quickly it’s going to come. You don’t understand the management of it. It’s really monopoly money when you go from getting a $500 (monthly) stipend in college to hundreds of thousands of dollars,” he said. “No one is prepared.”

He said people joke about the “curse of the lottery” and how winners often go broke not long after they become rich.

“It’s no different than athletes, or child stars who make a ton of money right away,” he explained. “You make a lot of mistakes early. You’re buying things and don’t pay attention to (your spending).”

Jefferson recalled getting this first NBA paycheck, which was just less than $100,000. But, because of a six-month lag between the time he left school, getting drafted and eventually receiving his first season check in November, “You may already be at a deficit,” he said.

While the first few years of making exorbitant sums of money involved making some mistakes, the past several years have been a time of increased financial understanding and better planning for the future, he said.

He said young players should take the time to understand where their money is going, what their expenses are and how their money is being invested. Though someone else may be charged with managing it, the ultimate responsibility still lies with the person who’s making the money to keep track of it.

“You want to understand loans, what credit can do (and) what bad credit can do,” he said.

Jefferson said, as he prepares for the end of his career, he has paid off outstanding loans and reduced spending in an effort to “simplify” and lower expenses. He also has contributed heavily to his 401(k) plan, which the league matches at 120 percent.

The NBA and the Jazz have each implemented programs to assist players in learning how to cope with their newfound riches.

Learning the ropes

The NBA’s Rookie Transition Program is a mandatory initiative for new, young players entering the league that helps provide them with information and resources to assist them in making better decisions in order to more successfully adapt to the lifestyle and challenges of the NBA. Created in 1986 by the league and the National Basketball Players Association, the program claims to be among the most comprehensive of its kind in professional sports.

There are eight categories on which the program focuses, including financial education, the business of basketball, drug and alcohol education, health and safety, legal education, media and image communications, professional ethics, and technology and continuing education. The league also sponsors a program to help players transition into new careers after retirement.

Utah Jazz president Randy Rigby said the team and many other NBA franchises have developed programs to help teach new entrants the lessons they need to manage their newfound wealth responsibly.

“You want to constantly reiterate to them that the average NBA career is four or five years, and you’re going to make a lot of money, but it will take fiscal responsibility (to manage it correctly),” he said. “This type of income is not going to be there forever, so you need to manage it so that you have (adequate) financial resources going forward.”

He said the league also conducts meetings with each team in their cities once or twice a season focusing on issues such as fiscal responsibility.

“We make sure our players are at those activities,” he said.

Rigby said the team has forged relationships with local financial institutions that offer financial advisory and wealth management services where players can access expertise on proper money management. The team also offers long-term help to current and alumni Jazz players in their post-basketball careers.

Trey's other team

When Trey Burke was drafted last summer, his family hired Michigan-based Compass Management firm headed by Daniel Sillman and Jordan Dumars. According to Sillman, Compass is a full-service management company that works with young athletes to help them avoid the pitfalls that often befall the newly wealthy.

The company advises athletes on all aspects of fiscal responsibility from housing to investments and tax planning. Issues that most high net-worth individuals may know, but athletes are usually unaware of or do not learn until it's too late.

Trey Burke met Sillman and Dumars while attending the University of Michigan. Both are alums of the Ross Graduate School of Business in Ann Arbor.

Sillman is the son of an investment banker and money manager, while Dumars’ father is Detroit Pistons’ president and NBA Hall of Famer Joe Dumars. The firm represents about 20 athletes from various sports.

Sillman said a team of professionals is assembled to closely monitor every aspect of their clients’ financial well-being.

“When we work with Trey, for example, we’re helping him from A to Z for everything from basic private banking needs to credit management all the way through helping him establish budgets for himself and his business entities,” he said.

The firm also oversees contracts with the team and any marketing opportunities.

The younger Burke’s rookie salary is about $2.4 million, but his monthly budget for spending money is about $5,000. He admits that having access to so much money is exciting, but it also requires discipline.

“I never really had a lot of money growing up, so I knew I was going to need the right team around me to make sure I was managing my money right, not just splurging and blowing it on things that aren’t necessary,” Trey said.

Since joining the league, Burke has been able to adhere to his budget “for the most part,” save for a few times when he bought plane tickets for friends to come visit when he first came to Utah.

His father said that Compass has pushed him to “stick to the budget” and, on the occasions when he has exceeded it, he reduced his spending the next month accordingly.

Thus far, Trey said he is pleased with the direction in which the team and his dad are pointing him. Looking ahead, Burke hopes to begin using his endorsement earnings as a main source of income to pay his living expenses and save all of his player salary for his post-basketball life — similar to former all-star Shaquille O’Neal, who lived off his endorsement income throughout his playing days and saved virtually every penny of the nearly $300 million he made in salary.

Lessons for everyone

Such prudent planning would serve any young person well in the beginning of their working life, said Ann House, coordinator of the Personal Money Management Center at the University of Utah.

“Live a sustainable lifestyle,” she said. “Those people who do get into trouble living this unimaginable lifestyle … spend it all instead of using some of that money to make more money.”

She said adhering to a reasonable budget and being thrifty when shopping for needed purchases is key.

“Always look for sales,” she said. “You can still live frugally even though you have the money to do otherwise.”

Whether you are a millionaire or an average person, the advice is the same, she said.

“Budget. Plan. Have goals and have ways to meet those goals,” House said.

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