As a professional athlete, it's easy to live in the now. You’re busy training and playing, traveling and being part of a high-energy, competitive environment. But retirement from your sport is inevitable. What will happen then?
We’ve heard the story far too many times: An athlete achieves fame and fortune at a young age, only to meet with financial ruin due to some combination of lavish lifestyle, bad investments or simply bad luck. From Mike Tyson to Boris Becker to Warren Sapp, the cautionary lesson is clear — When you don’t have a strong plan, it’s far too easy to outspend your resources and get blindsided by unexpected life events.
Can you preserve your wealth for yourself and your family and still enjoy the good life during your retirement? Of course! It all starts with a deliberate financial strategy.
Young athletes often don't dedicate time to preparing for the many years they will have after they retire from the sport. But financial planning is actually even more important for athletes due to their relatively short career spans and the early age at which most players reach their peak earning potential.
Think of it this way: You trained long and hard for a successful sports career. Your post-retirement career deserves just as much hard work and preparation — especially given the ever-present chances of a sudden, career-ending injury.
A financial plan drawn out early in your career will provide you with a clear financial roadmap so you can meet your goals and avoid unpleasant surprises.
An effective financial plan provides you with insight into three main areas of your financial life:
When you’re constantly on the road, focused on your athletic career, it can be hard to keep track of your finances. If most of your regular expenses are set up on autopay, you might not have a good grasp of how much you’re really spending each month. A financial plan helps make sure your money is there for you when you need it — both during your playing years, as well as when you retire.
Knowing what kind of income (if any) you can look forward to after retirement is a crucial piece of your financial planning puzzle. This is one reason why it’s important to start thinking about your post-retirement career as early as possible, ideally during your college years.
Alongside your income, your financial plan also looks at your expected expenses now and in retirement. One approach is to bucket expenses into three categories:
With your spending buckets solidly in place, you and your financial advisor will look at how you save and invest to protect those funds. If you already have a post-retirement career lined up, then your plan will look at how much income you can reasonably expect during your retirement years.
If your expected income will not be enough to cover your expenses, then you will need an asset allocation plan that ties your investments to each bucket.
Keep in mind that investments, often key to making future financial goals a reality, reduce your cash flow today. This is one reason why you need a holistic financial plan with a balanced portfolio tied to your short-, medium- and long-term financial goals.
The final piece of the financial plan considers risks. What are your goals, and what life events might derail your progress towards them? For example, your plan might show that you need to earn another $5 million during your remaining playing years. What if you get injured tomorrow? Insurance, including a good disability policy, will be an important part of your plan to protect your financial health.
Achieving your financial goals takes deliberate planning. A financial roadmap doesn’t guarantee results, but it does help you keep your eyes wide open by establishing a healthier relationship between you and your finances.
Expect your plan to evolve along with the inevitable twists and turns of life. You’ll want to sit down for a financial review at least once a year, as well as whenever you sign a new contract or reach other significant career milestones.
Finally, surround yourself with a strong financial team. Investment advisors, attorneys, accountants, insurance agents and estate planners are there to help you score the best financial outcome during and after your sports career. If you also have a business manager, they can act as the point guard of that financial team by helping you organize, execute and adjust the plan, and coordinate with other advisors.
When you do all these things early on in your career, you create more stability for your post-sport life — and better ensure that you can continue chasing your dreams.
To take control of your personal financial game and set yourself up to scale new heights of financial success now and in retirement, contact our Business Management team.
