By Marianna Kazazi, The Sports Financial Literacy Academy
Successful professional athletes are famous for their lavish lifestyles since, during their glory days they receive excessive amounts of money from various sources, including sports contracts, brand endorsements, NIL commercialization, performance bonuses and more. However, despite these high earnings, an alarming number of athletes end up going bankrupt, sometimes even before they retire.
Living luxuriously should not be frowned upon, given that athletes have worked extremely hard to achieve great things and have dedicated their entire lives to their sport. However, when treating themselves and their loved ones, they still need to have in the back of their minds that their career may end before they know it. Therefore, they need to focus on living a financially sustainable life, using their income to create long term wealth, especially if they have others depending on them financially.
There is a high percentage of professional athletes who once lived a lavish and extravagant lifestyle, while earning extremely large amounts of money that could have lasted them a lifetime, but ended up completely broke. A widely known example is Mike Tyson; the biggest success story in boxing history. During his boxing career, he won numerous championships and made a fortune. At the peak of his career, he spent carelessly, living in luxurious mansions, buying luxury cars and expensive jewellery. However, things soon took a turn for the worse and in 2003 he declared bankruptcy, having no money left in the bank.
There are various ways athletes can stay grounded, avoiding financial mismanagement and ultimately making their wealth last. First, it is crucial for them to hire a trustworthy financial advisor, who preferably specializes in sports and has other athlete clients, to guide and support them through their financial planning process. An advisor can also help them make more conscious financial decisions when it comes to their spending; prioritizing needs over wants and adhering to a budget through which they can save efficiently. Income diversification is an additional factor contributing to financial sustainability. To be more specific, athletes should consider searching for investment opportunities, franchising, and new entrepreneurial business ventures, utilizing their knowledge, skills as well as their fame. Athletes seeking to invest, should have an investment strategy in place, designed with the help of their financial advisor. This investment strategy should align with their long-term financial goals with risk tolerance; whilst always making sure that any investment choices are based on diversification to avoid potential mishaps.
Moreover, basic financial education can work wonders on changing the athlete’s mindset on what a fulfilling lifestyle entails. A life of luxury does not always translate to buying unnecessary, expensive things just because you have the means to, but instead it could mean investing effectively, to have enough resources to live comfortably even after retirement, whilst also supporting causes which are important to you.
In conclusion, overspending while not having enough savings, due to lack of financial knowledge and planning can quicky take athletes from financial success to bankruptcy overnight. Professional athletes should try to remain humble; living within their means and adopting healthy saving habits in an attempt to achieve financial freedom. Living in the moment and spending carelessly can be a recipe for disaster!
The Money Smart Athlete® Blog is established and run by the Sports Financial Literacy Academy® (SFLA). Through its education programs, the SFLA has the vision to financially educate and empower athletes of all ages to become better people, not just better athletes. For more information on our courses, our SFLA Approved Trainer Program®, and how they can benefit you and your clients, please get in touch with us at [email protected].
