By Vasilia Polycarpou, The Sports Financial Literacy Academy
Professional athletes must realize that retirement, whether voluntary or involuntary, is inevitable, with the average retirement age just below 30. Athletes have a short earnings window, making it essential to plan early for their financial future and retirement. Statistics show over 75% of NFL players go bankrupt within two years, and 60% of NBA players face financial struggles. Proper management and financial preparation are crucial to ensure athletes’ earnings last long after their peak in sports careers. Athletes must plan from day one of their professional career, as early financial planning can help avoid future financial difficulties.
Financial Planning
To get financially ready for retirement, athletes can start off by saving as much as they possibly can, from their very first pay check. The sooner they start saving, the more time their money has to grow. A prerequisite for saving is living below your means and prioritizing the future in a strategic way. It can be easy to get distracted by your athletic career accomplishments and engage in a lavish lifestyle. However, living for the moment can put your earnings at risk.
Creating a budget to keep track of your spending and saving would be key in helping differentiate between needs and wants. Your budget should be in line with your financial goals and priorities, accommodating for the lifestyle you wish to have. For example, former Detroit Lions wide receiver Ryan Broyles. When at the peak of his career, he and his wife had made the decision to live on $60,000 a year even though he had signed a three-year, $3.6 million contract with the Lions. Broyles has made conscious choices about his spending, choosing to focus on investing and growing his wealth.
Advisors
A vital step in the process of financially planning for retirement, is building a cohesive team of advisors. This can sufficiently assist you with the management of your financials. These advisors should possess expert knowledge to help you with setting up your budget, managing your taxes, providing guidance on saving and investment options, and supporting you from the beginning to the end of your retirement preparation. Your team of advisors should be in place even before you sign your first professional contract. Also, you should strive to build a long-term relationship of trust with them, since they will ideally be with you for a long time.
Football long snapper Morgan Cox, said that before deciding to hire a financial advisor, he asked his teammates in the locker room for financial advisor references. Even though he was a finance major in college. He did not feel like he could manage his portfolio on his own.
Financial Literacy
When it comes to being financially literate, continuous self-education is vital. Athletes need to be able to understand basic financial concepts in order to take the reins of their financial life and be in control of their financial situation. Having a team of financial advisors is necessary. However, athletes need to be able to ask the right questions, read and research, assess and evaluate the financial opportunities presented to them and be aware of the risks involved. Guidance and support from experts are important; however, the final decisions should always be the athlete’s own.
Alternative Career Path
Professional athletes have access to funds, capital, and a vast network, allowing them to explore alternative career paths after retirement. They can leverage skills acquired during their sports careers or pursue a passion they wish to turn into a career. Thinking ahead about life after sports can be invaluable for proactive and strategic post-retirement planning and long-term success. When the whistle stops blowing, opportunities to pursue new career paths could be gone, making early planning even more critical.
The idea of letting go of sports life as they know it, and adjusting to a completely different lifestyle, can be stressful for athletes. This is due to navigating the unknown. Being financially prepared from very early on is essential for ensuring a smooth and successful transition to life after sports.
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].