Professional athletes face many challenges on and off the courts and one that appears to be the most daunting is money management. Peer pressure, expensive lifestyles, giving beyond their means and an irresponsible family planning are some of the most frequent pitfalls that can drive any man’s finances into the ground.
Having a substantial income provides a lot of room for growth while establishing the groundwork for a comfortable debt free future at the same time. Making smart financial decisions as soon as you become a pro is a great way to avoid being part of the large percentage of athletes that ended up broke or severe financial strains after their career was over.
Here are just four smart money management tips for athletes:
- Start with the end in mind
Recently retired NFL Running Back Arian Foster recommends that every athlete analyze each contract as if it is the last one they will ever sign because your career in sports can be over at any moment. Spend below what you earn so you can save consistently, which will lead to building a nest egg that will allow you to invest conservatively and live off the interest and dividends.
His wealth manager, Humble Lukanga, offers some simple advice: “Let’s win this race at a turtle’s pace!”
- Built a solid foundation.
Metaphorically speaking, wealth accumulation works like a pyramid. An athlete’s finances should try to mimic this model, by starting with a solid foundation (cash, fixed income, and stocks). Some forms of investments like private deals, real estate, and other ventures like restaurants, bars, and music production companies frequently sound more exciting, but there is no need to take unnecessary risk.
When establishing a strong foundation is the first step, the use of a slow and steady, methodical approach will create enough room for some of these other types of opportunities in the future (within reason).
However, taking a careless approach with these alternative investments early in your career could significantly damage the base, causing the pyramid to crumble.
To learn more about investments, click here and get 8 investing lessons from NFL players.
- Mind the details.
From contracts or investing all the way to insurance, be aware of every detail. Some of the worst financial decisions come from not knowing all the terms and conditions. Sometimes something that seems minor, like the type of life insurance, can have a major impact on not just athletes, but anybody’s savings.
An athlete can ensure that finances are moving forward in the right direction by keeping track of every bit of relevant information or having somebody help them in that regard.
Do you want more lessons? Check out these 10 money lessons from professional athletes worth millions.
- Start Planning for your retirement as early as you can.
One of the most important psychological traits that enable professional athletes to succeed is self-confidence. However, a major obstacle that separates them from attaining long-term financial security is overestimating the length of their sporting career.
To assure their financial well-being, athletes should start planning as soon as they sign their first contract. It is important for an athlete to know that they should not rely on saving for retirement from a future contract, because factors like injuries, age, and declining talent may result in not getting another one.
To learn more about retirement, click here:
Keep in mind, the most successful athletes are the ones that start planning for their retirement early and contribute to a retirement fund from every paycheck.
Money Management is no rocket science but requires knowledge, consistency, and good planning.