How Ryan Lochte Overcame Financial Trouble
4 Money Principles I Learned From Olympian Ryan Lochte
In this episode of CNBC’s Back in the Game, Alex Rodriguez helped Ryan Lochte rebuild his reputation and financial outlook. Lochte was a 12-time Olympic medalist. He reached the pinnacle of athletic achievement and fame but all that crumbled because of his actions outside the pool during the 2016 Olympics. It was shocking to learn the naive financial mistakes Lochte made in the past. More so, the episode unpacked the importance of taking responsibility for mistakes and the value of rebuilding a positive reputation in order to gain more financial wealth and freedom.
Here are the frugal lessons from Ryan Lochte’’s CNBC Back In The Game episode:
OWN UP TO YOUR MISTAKES
As an Olympic swimmer with all the fame and glory, Ryan Lochte lived recklessly. He talked about his “old-habits outside the pool”, such as partying and drinking 10 shots the night before swim practice only to arrive at the pool the next morning reeking of alcohol. More so, Lochte fabricated a story about being held at gun-point and robbed by two men during the 2016 Olympics. Later reports revealed that these two men were actually security guards dealing with an intoxicated Lochte who had vandalized a gas station and urinated in public. Lochte was charged with falsely reporting a crime and subsequently suspended by the U.S. Olympic Committee.
He subsequently lost all his sponsorships (and money) with companies like Gatorade, Nissan, AT&T, Marriott, Ralph Lauren, and Speedo.
During the first half of the episode, Lochte did not take full responsibility for his mistakes. He insisted that he has taken responsibility while continuing to cast the blame on the media for spinning his stories and tarnishing his reputation. His denial and lack of responsibility for his actions made it nearly impossible to redeem himself and his financial future. It also kept potential sponsors (and money) away.
A-Rod gave Lochte some gems about taking responsibility in which other athletes can learn from:
A bad apology is almost worse than no apology.
When you own it, have a period at the end.
You do not have to be defined by your mistakes - how you come back matters.
A-Rod helped Lochte prove his sincerity with apologies to Frank Bush, president of U.S.A Swimming, and even Michael Phelps. As a result, Lochte was now seen as accountable. For athletes, if you make a mistake, own up to it. Make sincere apologies to your fans and peers. Taking full responsibility can mean the difference between no dollars and thousands of dollars.
BE IN CONTROL OF THE BASICS
When it comes to money, you can’t be naive. Ryan Lochte flirted with long-term financial disaster by not planning for the future, not budgeting his expenses, and not checking his bank accounts as much as he should. In fact, Lochte did not know how much money he had saved in the bank because the last time he checked his savings account was in 2017 - this episode aired in late 2019.
At the time of this episode, Lochte held one sponsorship from a swim company called TYR, where his base salary was supposed to be $150,000 based on performance. Since he was suspended, he couldn’t perform in the pool so his yearly salary dropped to $75,000/year. That’s $52,000/year post-taxes. When A-Rod factored in Ryan’s yearly expenses, Lochte was in trouble. He would have been about $27,000 in debt for the year if he continued to blindly keep his bill payments on auto-pay and live above his means. Without a budget nor weekly check-in of his bank account, Lochte had no positive financial future. A-Rod taught him that he had to be in control of his finances in order to have long-term financial success and stop living paycheck to paycheck.
For athletes - budget, budget, and budget. Even if you have an abundance of money, budgeting is vital. Downsize as needed and live below your means. Your financial future will thank you. If you don’t know how to budget, using an app like Mint or Clarity are apps that could work to help you keep up to date.
DOWNSIZING IS DIFFICULT, HUMBLING, AND NECESSARY
Early in the episode, Lochte and his wife Kayla had trouble downsizing enough to keep expenses low to fit within their budget. While they downsized from a large house to a smaller apartment without A-Rod’s help, they still didn’t downsize enough. They constantly lamented how it was difficult to move into a less spacious place than they had previously experienced. Additionally, monthly payments to pay off a Porsche and a Range Rover with additional monthly car insurance was unreasonable.
Many professional athletes receive chunk sums of money early on in their careers, especially with that first contract. The result is that many athletes spend and live lavishly because of that large excess of money and become so used to a non-frugal lifestyle. For Lochte and his wife, that’s exactly what happened. They assumed that money was constantly there. In reality, they were financially in trouble and headed towards debt. It was hard to let go of the lavish lifestyle they once lived. Downsizing was difficult, especially with no financial plan and budget in mind.
A-Rod helped Lochte and his wife by helping them downsize expenses and even trading in their luxury cars for more affordable ones. In fact, that’s the first step to creating a cash flow - downsize. With all their hefty expenses, Lochte and Kayla experienced no cash flow and not even a small level of financial freedom. They were blindly living paycheck to paycheck and living above their means. Using a service like trim could have helped them keep track of expenses they could have cut early in the process instead of waiting for A-Rod to help them.
Downsizing becomes easy and doable when you have a financial plan in place. For athletes at the highest levels of sports, downsizing possessions and expenses is humbling, but a necessary step towards creating a cash flow and having long-term financial success.
REPUTATION MEANS EVERYTHING
A-Rod took Lochte to get his Q-score (a score measuring a celebrity’s appeal to the public) measured in order to determine how damaged his reputation was. For athletes, a positive reputation means more marketing deals and dollars.
The idea is to have one’s positive Q-scores (positive reputation) outweigh their negative Q-scores (negative reputation). But for Lochte, it was the reverse by a longshot. Lochte’s positive Q-score was very low while his negative Q-score was very high among the eyes of the American public, especially on the west coast.
Thom Mozloom, president of the company who administered the test, said, “If I’m looking at you (Lochte) to be my brand ambassador, I can’t use you on the west coast right now.”
Lochte replied, “By the looks of it, you can’t use me at all...it’s devastating - not just on the west coast but the general population…”
The highlight for Lochte was that his positive Q-score slightly outweighed the negative Q-score among the swim community. This silver lining gave Lochte the push he needed to rebuild his reputation.
As an athlete, your reputation is everything. It is vital to maintain a positive reputation with the public as it can open doors for sponsorships and brand deals, leading to increased financial wealth. The more your reputation is tarnished, the more you have to work to build it back up into something positive. For Lochte, he had to work to become, as A-Rod said, a “credible voice” again.
