When most people think of professional athletes, they think of contracts worth millions, private jets and multiple homes.
But, all of that glamour and fame can be short-lived. As fast as these stars can rise, they can also crash if they do not have financial knowledge and planning. Often, their mistakes start with the first paycheck.
You might be surprised to learn that a very high percentage of NFL players actually end up filing for bankruptcy after retirement. Shocking right? Well, what they earn in a few years in their youthful career is often what a well-paid college-educated worker may earn throughout their entire lifetime. The peak earnings period in professional sports is far shorter than any other profession out there.
You’ve likely heard the stories of professional athletes who have resorted to selling Super Bowl rings and trophies to stay afloat. With so much time dedicated to the sport, they can fall short when it comes to financial know-how. Still, some have managed to avoid the common traps and enjoy their earnings throughout their lifetime.
So, where do things go so financially wrong for athletes?
Poor investment choices. From investments in movies and entertainment companies to falling victim to fraud, there are enticing but risky investment choices dangling like a carrot in front of athletes with money. One athlete recalls investing hundreds of thousands into a restaurant that was pitched as having really no downside risk, but the money is long gone and so is the restaurant.
Too much trust. It may sound silly, but athletes are introduced to friends of friends and hometown “managers” that they can also help out, and they sometimes are too quick to trust. Hiring someone because of a friendship or acquaintance rather than expertise is a recipe for disaster. Every so often, we even hear of a parent acting as an accountant or financial guardian that has gone wrong.
Being overly generous. When people have money, long-lost friends and family members in need come out of the woodwork. With money rolling in sometimes by the millions, a few thousand here and there might not sound like a lot to give to those in need, but it adds up. Athletes are known to take care of family mortgages and car payments and make impulse purchases for loved ones that resemble the average person’s annual salary.
Simply not enough information.Financial planning is not easy. That’s why it is important to have an experienced financial advisor. Learning about various investments, risk and balancing a portfolio can be like a foreign language for some. It takes a lot of time, which for athletes living and breathing a sport, is a luxury. Plus, how many of us have had budgeting and investing on the mind right out of college?
And, what do the smartest athletes do that carries them through their decades-long retirement successfully?
Put the first big check in the bank. And they don’t look back. Athletes can often receive first checks with more zeros than they ever thought possible. Smart athletes deposit their first big checks in the bank and then focus on the next game, not the next purchase. The most successful athletes today recall being very diligent about saving, especially in the beginning.
Make smart investments. Smart athletes know their playing time is limited and they have this in mind with every financial decision. They diversify investments between real estate, the stock market, and other well-researched opportunities. They consult with financial professionals and continue to find smart ways of earning their income.
Live below their means. Sure, they can buy flashy, but they opt not to. They don’t splurge on rims, jewelry and cars for every day of the week. They stay grounded and are more likely to make the daily purchases off of need rather than a desire to always have the “latest and greatest.” This does not mean they don’t enjoy their success, smart athletes simply choose what purchases are worth spending extra on.
Give back to the community and charitable causes. Using fame and fortune to give back and support good causes like cancer research and childhood hunger is admirable. There are many athletes that choose to support causes close to their heart. Giving a portion to charity can not only help with taxes in cases but also can help those in need plus spread good karma.
Even if you don’t earn like an athlete, you can learn from their mistakes and take away valuable information. It’s never too late to start being smart about your finances. If you need financial guidance or have investment questions, please schedule an appointment on Bayntree’s online calendar by selecting the date and time that is most convenient for you! You can also always reach us by emailing email@example.com.
Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.