The Cleveland Browns might be busy prepping for the upcoming football season (regular season play starts Sept. 6), but recently, they've tackled a different type of issue: money management.
In an episode of HBO's documentary series "Hard Knocks: Training Camp With the Cleveland Browns," defensive lineman Carl Nassib schools his teammates on the power of compounding — and it's a lesson everyone should understand; it's a secret to becoming rich and is preached by the likes of Warren Buffett.
"We got a lot of money right now, right? This is the easiest equation to make you rich," Nassib says (with many curses bleeped out) to a handful of teammates, pointing to an equation written on a dry-erase board that illustrates how compounding works.
Nassib, who went to Penn State, tells his teammates they can potentially turn $1 million into $64 million by the time they retire simply by taking advantage of compounding returns.
Compounding, generally, is when you make money on both an initial investment and the additional return it already brought in, whether via interest or capital gains.
Nassib fleshes out an example: If you invested $1 million, he says, and saw a 10 percent annual return, you would have $1.1 million after the first year. A 10 percent return on that $1.1 million the next year would turn your investment into $1.21 million, and so on.
After seven years, the amount would be $1.948 million, or nearly double the original investment. Leave it there for about 43 years and it would be close to that $64 million he promises his teammates.
(Though there are no guarantees in the stock market, from 1928 through 2017, the S&P 500 index produced a 9.8 percent average annualized total return. Speaking off the cuff, Nassib calls the idea compounding interest, which is similar but does not refer to investing.)
Nassib's lesson resonates with his teammates; they seem excited and eager about the potential to grow their money.
When asked by another player, "so you're telling me, that all I have to do is put $100,000 in the bank and let it sit there?" Nassib replies, "Yes," though in reality, the interest rates on regular savings accounts currently range from about .08 percent to 1.5 percent, as opposed to the 10 percent average investment return Nassib used in his equation.
In any case, Nassib's point is to put it somewhere that it will grow, and then "Don't f------ touch it," Nassib says. "[I]t's so f------ easy."
Nassib also tells his teammates that knowing the magic of compounding makes him think about how he spends money. "I don't spend money on stupid s---," Nassib, 25, tells his teammates. "I met Taylor Swift, and before the concert, I was like, I need to buy a Rolly [Rolex watch], so she knows I got it. And I didn't. Because of this."
Indeed, financial experts agree that taking advantage of compounding returns is one of the smartest ways you can grow your money.
In the clip, Nassib explains why it's important for his teammates to understand. He says there are financial advisors everywhere, but they'll take 1 percent of your money. Instead, learn how to manage your money yourself, and "you'll make a billion dollars."
Lack of financial literacy among NFL players is actually a common problem; one 2015 study by the National Bureau of Economic Research found that nearly one in six NFL players files for bankruptcy within 12 years of retiring, and it's the main plot point of HBO's "Ballers." The NFL has made strides in rolling out more programs aimed at helping players take control of their finances.
HBO's documentary series "Hard Knocks: Training Camp With the Cleveland Browns," follows the daily lives of the players and coaches of the NFL team as they prepare for the 2018 season.
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