We can learn from the financial blunders made by professional sportsmen. This post will go over three money buckets that athletes must fill. The first bucket contains a season’s worth of cash for their protection and security. The second bucket is for other things you need to consider for yourself, like life insurance. Finally, we will also cover developing a “game plan” that helps in wealth management for professional athletes.
Lessons learned from financial failures of pro athletes.
As one of the highest-paid pro athletes globally, Ben Simmons is a man of many riches. He will be paid six million dollars a year as the first player taken in the 2016 NBA draft. However, like any high-earner, the player may not be able to keep up with his enormous income and expenses. His agent stood up for him and ended his rash idea. Many stories of bankrupt athletes have emerged in recent years.
While the amount of money paid to pro athletes is significant, it is still not sufficient for most people to live comfortably. While salaries have increased steadily for the last three decades, many have failed to manage their financial lives. Unfortunately, many have gone bankrupt after retirement. As a result, many are facing severe financial stress. They fall prey to freeloaders, poor investments, and medical issues that are not always foreseeable. While some of these gamers have maintained their perfect lifestyle, others have lost their path and found themselves in financial difficulty.
Investing in low-risk investments
While they have enormous incomes, professional athletes often fail to make intelligent investment decisions. According to the NBA and NFL, three out of four players will go bankrupt within two years of retirement. These high statistics include reckless spending, short career spans, and ineffective financial advice. However, before deciding, ask yourself whether the risks are worth the rewards.
Professional athletes can diversify their investments through real estate and debt instruments. They can also purchase franchises of popular brands. This approach has lower risk and can be highly rewarding. However, athletes should be more cautious about investing in stocks since the potential for losing money is high. But this does not mean that athletes should avoid investing in stocks. Instead, athletes should use a wealth management service with a good track record.
Building an emergency fund
An athlete’s emergency savings fund is essential to their financial strategy. It should, at the very least, cover six months of spending. However, such a sum would take eight months to accumulate and cover at least one year’s expenses. In the case of a major accident, an athlete should have enough emergency finances to last a year. In addition, the amount of money in an emergency fund can be used for other financial goals, such as retirement, real estate investment, or personal purposes.
An emergency fund is a money that a professional athlete keeps aside for unforeseen expenses. It should be liquid and easily accessible in case a medical emergency arises. While cash is helpful for short-term costs, it doesn’t keep up with inflation, so it won’t buy you as much as it will today. However, excess cash can be invested for a higher return. Even if an athlete becomes a professional athlete, they may still be in their early 20s and should establish an emergency fund for that stage of life.
Developing a financial “game plan.”
As a professional athlete, establishing a solid financial plan is critical. However, the short timeline for significant earnings, varying long-term and short-term goals, and the risk of financial exploitation make predicting a pro athlete’s financial future challenging. Consider consulting with trusted advisors to avoid financial pitfalls and maximize your income. Here are some financial tips for pro athletes. Then, read on to develop an economic “game plan” for your career.
Athletes should consider investing in municipal bonds, blue-chip stocks, and other income-producing assets. However, they should not rush into a financial decision. To maximize investment returns, athletes should seek a professional who understands the unique challenges that pro athletes face. Financial advisors such as Adam Fein can offer a wealth management strategy geared toward pro athletes. With decades of experience working with athletes from various sports, he has a unique perspective on the issues that athletes face.