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There is a saying that experience is the name you give to the mistakes you make in life. However, this truism only works if you learn from the experience. In keeping with that theme, NBA legend Shaquille O'Neal once told a story about a hard financial lesson he learned through a negative experience.
The story begins when a young O'Neal was plying his trade for the Orlando Magic. At the time, he was one of the biggest phenoms in all of sports, and he had the paycheck to prove it. O'Neal was earning a hefty salary from the Magic, and he also had multiple endorsement deals. He was making several million dollars per year, and it looked like the money train would never end.
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So it was against this backdrop that Shaq went on a shopping spree for the ages. He recounted the story in an interview with the Earn Your Leisure podcast. Shaq said his agent called to inform him that an endorsement check for $1 million had just been deposited in his account. It didn't take Shaq long to figure out what he was going to do with the money.
Shaq told the podcast, "You know me, I already had that black Mercedes lined up." He immediately went to the local Mercedes-Benz dealership and bought himself a top-of-the-line model for $150,000. Then he decided to buy two more as gifts for his parents. Next up came a trip to the jewelry store for a lot of custom pieces made from high-quality diamonds. Then he needed a custom sound system for his car.
Shaq wrapped it all up by heading down to his tailor and getting some custom suits. When it was all tallied up, O'Neal had spent over $1 million in a matter of hours. Then the other shoe dropped. A few days later, the manager at Shaq's bank called to inform him that his account was heavily overdrawn. O'Neal was floored. He wondered how that could be possible.
He went on his shopping spree after depositing a check for one million dollars. Unfortunately, O'Neal failed to account for the fact that federal taxes are taken out of his "gross" earnings, and the remaining amount was his "net" pay. So is the agent's commission (which usually runs about 6%). All in all, it means that a million-dollar check to a pro athlete gets whittled down with blinding speed.
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In Shaq's case, his net earnings were about $600,000. That came as quite a nasty surprise. He elaborated, “I thought I was getting $1 million straight up.” Lucky for him he was living in Orlando and there was no state tax in Florida. Otherwise, he'd have gotten even less.
Even still, his bank statement told an ugly story. "As I was reading it, I was $80,000 in the hole and I was looking and I was really embarrassed,” he said. Fortunately, Shaquille took this hard-earned lesson to heart. It motivated him to get serious about understanding his finances and taking control of his future. Not long after the incident, O'Neal consulted a financial manager, and he's been building wealth ever since.
O'Neal became an early investor in Google (now Alphabet). He has also used his visibility to leverage endorsement deals in exchange for equity with numerous companies, including Ring and PapaJohn's Pizza. Today, O'Neal's worth is estimated at roughly $500 million, and he's more than set for life. With that said, it's unlikely he'll ever spend $1 million in a day again. A hard money lesson yielded a positive result in this case. Bravo Shaq.
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This article Shaquille O'Neal Credits This Hard Lesson With Teaching Him About The Value Of Investing originally appeared on Benzinga.com