It’s not uncommon to hear that professional athletes are broke. Sudden big paychecks often lead to big purchases and shortsightedness when it comes to the considerations for life after sports.
After all wealth doesn’t come with a coach or a playbook. In fact, many pro athletes set their spending patterns early on and find themselves working to keep up a good front with material items but have nothing invested away for the life-after-sports future.
Working with an experienced financial advisor and mentor early on in an athlete’s career can help that individual avoid the obvious pitfalls. Most recently ESPN’s “30 for 30” featured a segment looking at the subject of broke high visibility athletes. Everyone can learn from some of the pitfalls which include:
“In 1992, I was drafted by the Dallas Cowboys and I’d say 80 percent of my team from that year is now broke.”
• not having any guidance from a financial advisor early on and thinking that such guidance is only for the wealthy
• not fully appreciating the true value of money and assets when managed properly
• letting non-financial managers oversee financials
• spending before making or as fast as the money is made
• ignoring advice about saving for tomorrow. Phil Hanson, former NFL defensive end for the Buffalo Bills told his teammates, “A dollar saved today is 10 dollars tomorrow”
• feeling the pressure and obligation to financially support family members or friends or even making loans to friends and teammates in dire straights
• feeling overwhelmed by the financial pressures and expectations to the point of negatively impacting the athlete’s abilities and performance
• waiting too long to get a handle on the spending and making a lot of mistakes before figuring out there is a true need for managing toward a healthy financial future
Take Lomas Brown, former NFL offensive tackle and current ESPN broadcaster and analyst for example. He points out that when he was young he felt he would be playing the game forever and so mapping out his exit strategy wasn’t something he planned for. “I bought a car before I actually got signed by the Detroit Lions in 1985. I bought my mom a house and spent a lot more money than I needed to. When you’re young you think you’re invincible.” While Lomas was fortunate to have a longer playing career (eighteen seasons) and figured out his financial management in time, this isn’t the case for many other professional athletes.
Darren Woodson, the former NFL safety, is quoted in ESPN’s Athletes Being Broke saying, “In 1992, I was drafted by the Dallas Cowboys and I’d say 80 percent of my team from that year is now broke.”
So why is this happening to pro athletes? Well the truth is it isn’t just happening to pro athletes. It’s happening to successful people every day who are not accustomed to managing a windfall of money.
“The lifestyle is a gift and a curse. My third year in the league I had a Pro Bowl player ask me to borrow money. It can happen. You have to be smart with your money because the big paydays don’t last forever.”
Agents need to be coaching their rookies to have a financial advisor long before they make big money.
A good financial advisor will work with clients early on in their career to set up good habits and build toward future goals. Each athlete needs a senior mentor who has been there and appreciates that most athletes have a short window of playtime in their career and that’s when they need to capitalize on their savings and investments. Every athlete needs a financial advisor so they can clearly outline who they are paying and why.
A financial advisor should also analyze the potential for loss, the deprecation of assets, the impact a career-ending injury could have and how to plan ahead, as well as the impact that property damages and loss can have. Plus they look at some of the bigger legal liabilities a coach may have looming as well as the simple concern of overpayment on taxes because of poor portfolio planning and management.
The goal is for each athlete to have the A-team supporting them and empowering them toward a smooth transition into “life after sports.”
For many professional athletes, planning for the future may not be on their agenda. Playing the game is. However, it’s essential to have a financial advisor, a seasoned sports mentor and a game plan well before they head out to play hard and score big.
It’s easy for each athlete to get caught up and mismanage their income and assets whether big or small. Each rookie deserves to be educated on the good and bad of becoming wealthy fast. As Tutan Reyes, NFL free agent guard, points out, “The lifestyle is a gift and a curse. My third year in the league I had a Pro Bowl player ask me to borrow money. It can happen. You have to be smart with your money because the big paydays don’t last forever.”
David Osborne is the founder of Osborne Advisors, an independent private wealth management firm offering wealth management to high net worth individuals, families, estates and corporations since 1999. An extension of Osborne Advisors, Osborne Advisors Pro, is a sports wealth management offering created solely to focus on the unique financial management needs of professional athletes and coaches.
Securities are offered through SWS Financial Services, Inc., 1201 Elm Street, Suite 3500, Dallas, TX 75270, 214.859.1800, Member: FINRA/SIPC.