If 2020 has taught us nothing else, it is to expect the unexpected. We will cover 7 best practices for athlete wealth management and they can best position themselves for future financial success.
Pro athletes, especially, have encountered challenging circumstances as sports, players and the public return to stadiums for games. And while the 2020-21 era will always be a uniquely special span of time for the difficulties faced, what is unfortunately a common scenario in the sports world is professional athletes losing the money and financial success they worked so hard to attain.
Scammers prey on newly-minted athletes. Scholarship-driven grads moving straight into professional sports may not have had time to learn the basics of budgeting or even something as simple as keeping receipts. Being young and flush with cash can create a storm that a newer athlete may not be able to weather.
Despite making millions, far too many athletes have also lost millions due to bad or hasty investments, trusting the wrong people, or even just being too nice.
If you are an athlete, setting up your financial future is just as important as regularly attending practice. Drills and repetition give you the ability to play well without even thinking about it. Preparing for your financial future will allow you to retire without even thinking about it.
7 Best Practices for Athlete Wealth Management
Ways to Grow Wealth & Position Yourself for Future Financial Security
#1 Remember that your situation is temporary.
If you are not careful, your money will be temporary too. There are a handful of long-time players in sports, but the average career length in pro sports is 5-7 years, depending on the sport. Injury, or other issues can end a career even earlier than expected.
While you may make more per game then most Americans make in a year, that money can go out the door just as fast as it came in. And the tale is told over and over about the pro athlete who wonders where all his money went.
You will statistically live for much longer than the brief time you play. You don’t want to outlive your money. Most Americans will retire between 65-70. You will likely retire by 30. Done right, you can make your earned income’s growth outpace your life—even having a legacy to leave for children and beneficiaries.
#2 Don’t try to live the life of a veteran athlete just to show off.
Your fellow athletes are all going through the same thing. You have nothing to prove. Older athletes may already have endorsement deals and sound investments in place. You can’t compete with that without blowing through all your money. And that is the exact problem you want to avoid at all costs.
Take the time to get your money working for you while you focus on your craft. If you never end up with endorsements, it won’t matter that much. Your preparation will net you wealth anyway.
#3 Don’t fall for the trap of being incapable of saying “No.”
If you are a newer athlete, you may be acquiring vast wealth for the first time in your life. The sudden financial windfall can be a lot to handle responsibly. Friends, family and acquaintances will suddenly begin to appear. Beware “the handout!” We will look specifically at caring for family in another bullet point.
Opportunities to invest will pop up all around you. Unless you are familiar with the growth vehicle yourself, don’t be afraid to say no. Better to do nothing with your money than to lose it. Of course, since inflation outpaces cash, the point of this blog is to give you a way to do something constructive and profitable with your money.
#4 Don’t rely on friends and/or family to manage your money.
Take this advice from Magic Johnson himself. He strongly discourages athletes from taking counsel from or allowing friends and family to broker deals for you. Ask yourself: “If my cousin wasn’t good with money before, what makes him good with mine now?”
Magic refuses to mentor or work with pro athletes who insist on using family/friends for financial purposes. He states: “[Athletes] hire these people not because of expertise but because they’re friends. Well, they’ll fail.”
You can get yourself to a place where taking care of your mom and dad or grandma is possible, but you have work to do first. Think of your financial plan/strategy like any play used by your team. A series of things need to take place consecutively before points can be scored. You can’t just materialize in the end zone.
#5 Don’t invest in things you don’t understand.
This can be taken a step further. You will be relying on trusted advisors and strategists at some point. We all do. However, if you put money into things you don’t intrinsically know about yourself, make sure the person/manager doing the management for you does!
Take the time to “interrogate” any potential guru to verify they know their recommended vehicle intimately.
To illustrate: Think about art. There are counterfeit paintings out there. Can you tell the difference? Likely not (unless you majored in Art). Anyone using your money to buy an original Picasso better be an art expert and explain to you how you can all be sure you aren’t about to buy a fake.
#6 Spend money soundly & wisely.
It’s not important to only know about your particular ways of growing money. It is also vital to understand a bit about how investing should work. As a pro athlete, finding the time to spend learning about hedge funds or reading a prospectus can be very hard to come by. When you are investing in the market or in securities products such as stocks, those types of investments require a licensed broker. However, you can clearly grow money in many other places.
Traditional thinking about investments is: “I have to learn all there is about this stock and the market!” or, “I need to cram on how to understand real estate!” We have good news. There is a much easier way. How? Set parameters for your investing with the following 3 aspects:
- How stable is this?
- How predictable is the growth?
- Can this asset growth vehicle be scaled?
The opportunities for growing wealth that we at Position Yourself Wealth Strategies educate on are quite stable. Many times the ROI is at a fixed interest rate. At the very least, there is a combination of fixed rate and variable rate components when it comes to wealth management for professional athletes.
With any fixed interest yield, growth becomes insanely simple to predict. While many obsess over how much will be in their 401k when they retire due to the unpredictability of the market, the right vehicles will grow at discoverable rates.
If you were to invest in a franchise and it does well, you can always buy another and replicate your process. That’s scalability. By copying the first success, you should be set up nicely for a repeat. Position Yourself Wealth Strategies also wants that scalability for the financial growth vehicles we provide education on.
Having stable and predictable ways to grow money that can be rinsed and repeated is one of the BEST ways to handle money soundly and wisely.
#7 Give back to family & community after securing your own financial future.
The urge to care for those we care about is strong. And there is absolutely nothing wrong with wanting that and doing it.
Even if you can say “no” to all your new-found friends once you come into wealth, large-hearted pro athletes can still suffer from ‘survivor’s guilt.’ This happens when you go back to your old community or neighborhood and reflect on where you came from. There are many athletes that, despite the odds, made it out of a tough neighborhood where their peers weren’t so lucky.
Seeing your success and their struggles may urge you to give back. This is a noble goal. But giving away all your money leaves you with nothing more for yourself or your loved ones and community.
No doubt you’ve flown on an airplane. During the safety instructions pre-takeoff, you are advised that in the event of oxygen masks being deployed, you are to secure yours first and then help children or other passengers with theirs. This prevents you from succumbing to the situation affecting everyone else who may be more susceptible than you.
With your wealth, you are now in a prime position to help others. But not if you don’t first secure that wealth. Learning to allow your money to make more money is the key and something we can easily show you how to do with strategic wealth-building principles for athletes.
When you can protect your principal wealth, compound your interest and earnings, and live off of the fruits of those two first things, your wealth will be secure and allow you to live a comfortable life, care for loved ones, and give back to your community should you choose to do so.
Contact us to learn about stable and predictable ways to grow wealth that can not only protect that wealth, but also keep it ever-growing.