How can an athlete go broke after earning millions of dollars? Some people might say it’s just the fast life. But when you look a little closer, you’ll see what’s really chipping away at their fortunes.
Keep An Eye On Your Money
“When it comes to personal finance, get personal, because it’s your money and no one will ever care more about it than YOU.”
Most athletes trust the people (friends, family, agents and others) around them for professional recommendations. And typically depend on others (financial advisors, accountants, lawyers) to manage their finances. After all, these people have the titles, so they must know what they are doing. Right? Not always.
That’s why you have to stay in control and involved with your finances. It’s important to know where your money is going. What do you owe? How’s your credit? Are bills being paid on time? Unfortunately, a friend of mine (former NFL player) discovered this principle a little late—after someone he trusted lost his money. He learned from his mistake and decided to take control of his money himself. And now he’s doing much better financially.
Live Below Your Means
“Be assured that it gives much more pain to the mind to be in debt, than to do without any article whatever which we may seem to want.” – Thomas Jefferson
Sounds like common sense to spend less than you make. However, many people struggle with this, even athletes earning millions. Believe it or not, during the NFL lockout it was reported that more than 20 percent of the players were living paycheck to paycheck.
You can easily fall into this trap if you have a hard time saying no or when you’re trying to keep up with the Joneses. Living the lavish lifestyle of $200,000+ fast cars, million dollar homes, expensive yachts and pricey jewelry can quickly shrink that multi-million dollar contract. Have you ever heard of the saying, “it’s not how much you make, but how you spend it”? In other words, no matter how much money you earn, you have to control your spending. A great way to do this is to create a financial plan and stick with a budget.
“An investment in knowledge always pays the best interest.” – Benjamin Franklin
Bad investment decisions are probably one of the biggest reasons athletes file for bankruptcy. Fortunes have disappeared because of ponzi schemes, real estate losses, con artist scams and poor business ventures.
Of course there’s always risk involved with any investment. But a good rule of thumb is “if it sounds too good to be true, it usually is.” It’s important to work with a financial professional you trust with a proven track record (i.e. employment history, licenses). You need to check his/her background (any violations?), experience and references. You must also understand any investments you make. Visit finra.org for more investing tips.
When it comes to business ventures, take the time to fully understand the business proposal upfront. How does the business work and make money? What experience does the leadership team have? Does it require a guaranteed loan investment? Be sure to do your research before investing.
Whether you’re an athlete or not, these three things could make a big difference in your financial future.