Professional athletes need financial advice. Perhaps more than any other career, athletes suffer from a boom-and-bust lifestyle. For the highly-paid professionals in leagues like the NFL, NBA and MLB, these players can be extraordinarily wealthy by the age of 25. Yet according to research aggregated by Sports Illustrated many, if not most, eventually lose it all. When it comes to helping avoid those problems, a financial advisor can help you not only avoid these problems but also help you flourish after your career.
Short, Early Career Planning
As reported by ESPN, the average NFL player will have a 3.3 year career. A basketball player in the NBA gets a little longer, with the league reporting an average career of 4.5 years. In major league baseball you get a little longer … 5.6 years before the average player is over and done.
That is not a lot of time to make your money. By contrast, while the data ranges, most people have about 40 to 48 years in their working career. So as an athlete you need to pack more than 10 times as much saving and earning into each year as a normal person.
They have 40 years. You have four.
From a financial planning standpoint, you need someone who can help you take advantage of both the up- and down-sides of this reality. The downside is obvious. Professional athletes have an extremely short window in which to make their money, so they need to capitalize on it quickly.
The upside, though, is that not only do you make astronomically more per year than the average worker but you make that money very early in life. This means that if you find someone who can help you invest with discipline and forethought, you can create a million-dollar retirement account by age 25. With nothing to do but grow over the next several decades, that can turn into a source of outstanding financial security … if you put it there and leave it there.
Post-Career Planning
Most professional athletes leave the game in their 20s, and very few keep playing after they turn 30. That leaves you with decades left to do something. The only question is … what? A good financial advisor will help you answer that question. If you make a strong plan for your post-career life during your career, you’ll be ready to pivot into new and potentially lucrative areas by the time retirement comes along. After all, as a professional athlete you’ll have a lot going for you. The trick is to capitalize on your status, potential name recognition and membership in an extremely selective club.
If you do it well, you can pivot into areas that can keep earning lots of money like advertising, announcing, coaching and more. Or you can take your money and move into personally rewarding work, like helping to build nonprofits. Not only can this continue adding to your wealth, if that’s the route you choose, but it will help you save money too. If you’re bored at age 30, the odds are good that you’ll start spending some of that saved money just so you can have something to do.
Slow Everything Down
This can take a lot of different forms, but the throughline is this: If you’re a young athlete, with millions of dollars suddenly in hand and the world at your feet, one of your biggest financial risks is speed. It’s just too easy to spend a lot of money quickly.
For most people, making a major purchase takes saving and deliberation. The average individual doesn’t have a down payment just sitting around. Before they can buy a house or a car they need to save up and find an affordable monthly payment. That takes time, which helps them decide if this is really the right move. When you have millions of dollars in the bank, though, you can make that purchase on a whim. You can get a mortgage on the spot, when you need it at all, and can usually drive or sail off in a new vehicle less than an hour after deciding to buy it.
When you suddenly have money, people appear out of the woodwork with amazing deals, can’t-miss investment opportunities or just looking for a loan. When you’re rich it’s easy to sign the check and see what happens.
When you have a lot of money it’s easy to spend a lot of money. So one of the best things a financial advisor can do is to slow things down
Adding a financial advisor to the process can force you to take one more step before making major financial decisions, even if they don’t feel major at the time. Just having to wait for your advisor to call you back can make any purchase a little more inefficient, which gives you the time to think about impulsive purchases and investments. Even beyond specific financial advice, just slowing things down can be an enormous help in the long run.
What to Look For In an Advisor
A professional athlete presents a unique financial profile. You’re generally young, overnight wealthy with an extremely short, high-intensity career ahead of you. So you need a financial advisor who can help meet a few specific challenges. First, you need someone experienced with wealth management. Most financial advisors plan around income, meaning that they will build you a financial plan that assumes you will make money steadily over a period of decades. Wealth managers, on the other hand, build a plan specifically around significant, existing assets.
You also want someone experienced at managing money for professional athletes specifically. A professional athlete’s finances have several unique profiles, including how you earn and structure your income. For example, it’s likely that you will eventually have multiple homes, depending on where you live and where you play or train. You might also earn money in literally dozens of different states each year, triggering so-called “jock taxes” that can apply any time you earn money in any given state. You need a financial advisor who can not only handle these issues but anticipate them in advance.
Finally, perhaps most importantly, you need someone who can act as a financial coach as much as an advisor. This means you want someone who can talk to you about lifestyle and personal decisions as much as financial ones. The best financial advisor is someone who you can listen to when they tell you to cut back on a lavish lifestyle even while all of your teammates and friends are living the dream.
If you choose particularly well, or get particularly lucky, your advisor will have played ball once too. After all, everyone knows the best coaches left it all out on the field.
Bottom Line
For professional athletes, their financial lives are defined by a burn-fast, burn-hard model. You can make a fortune in just a few years, so the best thing that a financial advisor can do is to help make sure you don’t spend it just as quickly.
Tips on Financial Planning
- Right now, athletes don’t get to make any money until they hit the pros. Specifically that means that those NCAA players who light up the screen every fall and March have to wait before getting paid. But should they?
- No matter who you are, a good financial advisor can help you develop patience and discipline. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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