If you’re an athlete and you’re trying to decide whether or not it is essential to have money, a hip-hop artist, or even a professional poker player, your options are limited. There’s no shortage of experts saying money is bad, poor investments, or simply a waste of time to have. And while some athletes do choose to make money off their talents, there are those who don’t.
There is a long history of professional players who have spent millions of dollars, made poor investments, or declared bankruptcy following a successful sporting career.
Other players, such as basketball sensation LeBron James and former Dallas Cowboys running back Emmitt Smith, have been equally successful off the field or court.
The majority of athletes are recruited at a young age and retire at a young age. They all have lofty goals, but they must plan for the realities of a brief career and a lengthy retirement. Off the field, athletic ability does not ensure financial success.
What distinguishes a strike from a homerun? The key is to empower yourself with as much information as possible as soon as possible and plan for the future while you're still playing.
Athletes' financial potential is jeopardized by short careers, potential injuries, and an often expensive lifestyle.
Major League Baseball (MLB) and National Hockey League (NHL) players have nearly six-year average playing careers, whereas National Football League (NFL) players have only three-and-a-half years. Many players earn far less than those who make headlines, such as Golden State Warriors star Stephen Curry, who inked a $201 million contract.
"I've seen players squander it all and preserve practically every single penny; the typical player is somewhere in the middle." "RBC Wealth Management U.S. financial advisor Joe Palumbo remarked Palumbo stated of his NFL clients, "We start talking about life after football right away." It is vital to begin saving and investing as soon as possible so that income may increase and generate returns over time."
ON AND OFF THE FIELD, ROOKIES
Despite several eye-catching multi-million dollar contracts, the average rookie deal in most sports this season is approximately $500,000. For certain NFL rookies, signing incentives can increase wages, but few other sports provide them.
For a young person in their 20s who has just graduated from high school or college, that amount of money is still significant. Since many of them probably haven't ever used a credit card or had bills to pay, the financial burden may seem excessive.
Athletes must realize that making financial decisions shouldn't be hurried, whether they include buying a new house or investing in a side company.
Todd Burach, manager of sports and entertainment at City National, noted that mistakes occur when judgments are made hastily.
At the Area Code Baseball Games in California, Boris Gluzberg, the team leader of the City National sports project in New York, held a financial literacy presentation for high school students and their parents. Shawn Green, a former baseball player, was called in to respond to inquiries. The largest contract in 2000 was a $84 million deal for a first-round draft pick.
"The youngsters are drawn to previous athletes because they are role models for them, "added Gluzberg. How do we open accounts and how do we acquire a credit card are the most often asked questions. My emphasis is on financial knowledge."
Budgeting, spending, taxes, and insurance are the first topics covered in financial discussions with young athletes, according to experts from RBC and City National, before moving on to investing. One of the first pieces of advice for athletes is to set up a financial reserve to cover 12 to 18 months' worth of costs in case of accident or other unforeseen circumstances.
They should then establish yearly savings goals based on their financial objectives, such as purchasing a home or opening a company. According to Adam Fein, senior financial associate at RBC Wealth Management and financial advisor to athletes in a variety of sports, you should think about investing in blue-chip companies, income-producing securities, and municipal bonds with an eye on life after sports.
BEWARE OF CURVEBALLS
But there are a variety of factors that might put an athlete's career on hold. If players spend lavishly on luxury clothing, exotic vacations, and residences, their millions might vanish swiftly.
Should you get that posh car? "enquired Burach. "You've worked your entire life and just signed a contract worth millions of dollars. Treating yourself is OK as long as you stay within the parameters of the plan you established."
A player's contract or career might be cut short by an injury. He advised players to think about term life insurance and complete permanent disability insurance to safeguard their future earnings.
Wealthy athletes may become prey for con artists. When something seems too good to be true, it generally is, Palumbo cautioned.
Create a solid team for yourself, one that includes a sports agent, financial adviser, lawyer, and/or accountant to act as your gatekeepers.
While some athletes wed before to becoming professionals, others who wed afterwards may choose to use a prenuptial agreement to safeguard their money. For instance, all earnings and assets acquired during a marriage are regarded as community property in California and are owned equally by the couple.
These experts also advised players with kids and more than $1 million in assets to set up a trust for peace of mind and inheritance and tax planning reasons.
RENEWAL HOMERUNS
Because professional athletes may still be in their 30s when they retire, it differs from retirement for ordinary individuals. The topic of wiping off all of your obligations (if it's possible) and developing income-producing investments to fund retirement costs may come up while talking about life after athletics.
Many athletes start second jobs in industries like real estate, fashion, television, or dining. However, for every George Foreman and Venus Williams who have achieved success outside of athletics, there are scores of athletes who have lost all of their money or failed in their commercial endeavors.
According to a Sports Illustrated story, over 60% of former NBA players wasted their money within five years of retirement.
Furthermore, owing to a brief career, poor financial decisions, and a costly lifestyle, NFL players may not have enough saved for retirement. According to a National Bureau of Economic Research research, bankruptcy filings increase within the first 12 years after retirement and begin immediately after leaving the league.
It's about filling your time and not spending money, not necessarily about producing money, "explained Fein. Finding something you're enthusiastic about is more important than having a home run with your business, in my opinion."
Basketball stars Magic Johnson and LeBron James, both current and former players, have consulted financial titans like Warren Buffett and Hollywood agent Michael Ovitz for guidance. Some players even invest in startups these days in the hopes that a modest share in a business may grow into the next Google.
LeBron James and Blaze Pizza, one of his investments, are popularizing economic expertise among athletes "Burach said. "It encourages younger players to imitate them. There must be a balance between putting your all into the work you have now and planning for the future."
You've consistently engaged in the best competition. In terms of your finances, don't accept less. With the help of City National Bank's Sports Banking team, take it to the next level.
