The Top 5 Financial Do’s and Don’ts for Pro Athletes

Financial Management for Athletes

In professional sports, athletes often find themselves thrust into sudden wealth and fame. While their athletic prowess brings them success on the field, court, or arena, many struggle with managing their newfound fortunes off it. Financial management for professional athletes is a critical skill that distinguishes between long-term prosperity and post-career financial distress.

This article delves into the top five financial do’s and don’ts for pro athletes, offering valuable insights to help them navigate the complex world of personal finance. By adhering to these guidelines, athletes can safeguard their wealth, plan for the future, and ensure financial stability long after playing.

Do: Build a Strong Support Team

One of the most crucial steps a professional athlete can take is to surround themselves with a competent and trustworthy financial support team. This team should consist of experienced financial advisors, accountants, and lawyers who specialize in working with high-net-worth individuals and understand the unique challenges athletes face.

A strong support team can help athletes make informed decisions about their finances, manage their wealth effectively, and protect their assets from potential risks. For instance, NBA superstar LeBron James has often credited his financial team, led by his childhood friend Maverick Carter, for helping him build a business empire beyond basketball. This team has guided James in making smart investments and securing lucrative endorsement deals, contributing significantly to his estimated $1 billion net worth.

Amerant Bank’s Sports & Entertainment Banking services offer specialized support for professional athletes. Their team of experts understands the unique financial needs of athletes and can provide tailored solutions to help them manage their wealth effectively. From customized banking services to investment advice, Amerant Bank can be a valuable partner in an athlete’s financial journey.

Don’t: Neglect Financial Education

While having a strong support team is essential, it’s equally important for athletes to educate themselves about financial matters. Neglecting financial education can leave athletes vulnerable to poor decision-making and potential exploitation.

The risks of not understanding financial matters are significant. Athletes who lack financial literacy may fall prey to fraudulent investment schemes, mismanage their wealth, or make ill-informed decisions that can jeopardize their financial future. The story of former NFL player Vince Young, who filed for bankruptcy despite earning $34 million in six years, is a cautionary tale of the perils of financial ignorance.

Fortunately, there are numerous ways for pro athletes to educate themselves about money management:

1. Attend financial literacy programs offered by their leagues or players’ associations
2. Enroll in personal finance courses at local colleges or online platforms
3. Read books on wealth management and investing
4. Seek mentorship from financially successful retired athletes
5. Regularly engage with their financial advisors to understand their financial strategies

By focusing on financial education, athletes can take an active role in managing their wealth and make more informed decisions about their financial future.

Do: Save and Invest Wisely

Professional athletes’ careers are often short-lived, with peak earning years limited to a decade or less in many sports. This makes saving and investing wisely crucial for long-term financial security.

Athletes should prioritize saving a significant portion of their income. Given the short duration of most athletic careers, financial experts often recommend saving at least 50% of after-tax income. This may seem high, but it’s necessary to build a financial cushion that can sustain an athlete’s lifestyle long after retirement.

Investing wisely is equally important. Athletes should consider a diversified investment portfolio that includes:

1. Low-cost index funds for broad market exposure
2. Real estate investments for potential passive income
3. Bonds for stability and regular income
4. Private equity or venture capital investments for potentially higher returns

Some athletes have found great success through smart investments. For example, former NBA player Junior Bridgeman turned his $350,000 salary into a $600 million fortune through savvy investments in fast-food franchises.

Don’t: Overspend on Luxuries

The allure of extravagant spending can be strong for professional athletes, especially when they start earning significant amounts of money. However, overspending on cars, jewelry, and other short-lived luxuries can quickly deplete wealth and lead to financial difficulties.

The consequences of reckless spending can be severe. Many athletes have faced financial ruin because of lavish lifestyles they couldn’t sustain. Former NBA player Antoine Walker, who earned over $108 million during his career, filed for bankruptcy two years after retirement, largely because of extravagant spending and poor financial management.

To avoid this pitfall, athletes should:

1. Create and stick to a budget that aligns with their long-term financial goals
2. Identify and categorize between needs and wants
3. Limit large purchases and consider the long-term value of their expenditures
4. Seek advice from their financial team before making significant purchases

Remember, true wealth is about building lasting financial security.

Do: Plan for Life After Sports

Athletic careers are often short-lived, with many athletes retiring in their 30s or earlier from age, injury, or other factors. Planning for life after sports is crucial for long-term financial stability and personal fulfillment.

Transitioning from a sports career to retirement can be challenging, both financially and emotionally. Athletes need to prepare for this transition by:

1. Developing new skills and exploring alternative career paths
2. Investing in businesses or franchises that can provide ongoing income
3. Building a personal brand that can lead to endorsement deals and speaking engagements
4. Pursuing education or certifications in fields of interest

Strategies for Building a Sustainable Post-Sports Financial Plan

• Creating multiple streams of passive income through investments
• Gradually reducing expenses to align with post-retirement income
• Considering a second career or entrepreneurship
• Protecting wealth through proper insurance and estate planning

Many athletes have successfully transitioned to new careers after sports. For instance, former NFL player John Urschel retired at 26 to pursue a Ph.D. in mathematics at MIT, showcasing the importance of planning for life beyond athletics.

Ensuring Success Out of the Spotlight

Professional athletes face unique financial challenges and opportunities. By following these five financial dos and don’ts, they can set themselves up for long-term financial success.

Professional athletes need to prioritize their financial well-being from the start of their careers. By making informed decisions and planning for the future, athletes can ensure that their wealth lasts long after their playing days.

For personalized advice and support, professional athletes can speak with an Amerant Bank Private Client Relationship Manager. These experts can provide tailored financial solutions that address the unique needs and goals of athletes, helping them navigate their financial journey with confidence.

Remember, financial success in professional sports isn’t just about how much you earn but how well you manage and grow your wealth over time. By seeking expert advice, athletes can consider their financial futures and focus on what they do best—excelling in their sport and building a legacy that extends far beyond their athletic achievements.