Congratulations! You just signed your first professional sports contract, and you are set to make a lot of money. You will likely earn more money in your twenties than most people earn in a lifetime. What do you do now? How do you turn a five-to-fifteen-year career into a lifetime of financial security?
- Breathe, pause, reflect, and appreciate what you have gone through to get to the pros. You have worked extremely hard to get to this point and will continue that work ethic as a professional.
- Contrary to what many people might be telling/selling you, you do not have to do anything right away. Do not make a big expenditure or escalate your lifestyle during the first several months of receiving your first paycheck. And do not buy anything before you start receiving your money. Now is also a bad time to borrow against your future earnings. Instead, take time to mentally adjust to your new financial situation. There is plenty of time to splurge later. However, once it is spent, it is gone.
Phase 1 – Safeguarding Your Future: Initial Steps and Protective Measures
The check/wire arrives, and your family and friends know it. What do you do?
- Open a bank account at a large national bank and deposit the funds. Decline the bank’s offer to have you speak to their investment representative.
- Seek referrals from your trusted professionals (agent, coach, or league resource) for a financial advisor who is a registered investment advisor (RIA). Do not work with an advisor who is a family member, friend, friend of the family, or college acquaintance. Now is not the time to give out a favor. This is the beginning of your life savings, and you need to work with the best. Having a competent, independent, experienced, honest, and emotionally stable financial advisor is the first key to long-term financial independence. Try to interview at least three financial advisors before selecting one. Conduct a background check (including BrokerCheck and Advisor Info) before making a final decision.
- Say No! You will be offered investment products, cannot miss business opportunities, and recommendations on how you should manage your money. Say no to all offers. Most of these will come from people who have no experience handling the type of money you are about to earn. Friends and family will request loans, gifts, and money to start a business. Say no to all these requests (you can always choose to help somebody out later, but you must say no for now). If you have already found a good advisor, you can tell the people asking you for money that your advisor told you not to commit your money to anybody. Blaming your advisor can make saying no less personal.
Phase 2 – Planning for Success: Defining Your Goals and Priorities
Before making a major purchase, upgrading your lifestyle, or evening making an investment, start making a financial plan with your financial advisor.
Now that a few months have passed, start determining what you want your success and financial windfall to accomplish.
- Do you want to live your best life and enjoy a “rockstar” lifestyle with expensive purchases and luxury experiences until the money is gone and worry about the rest of your life later?
- Do you want to fund your friend group and keep the party going until all the money runs out and the music stops?
- Do you want to buy your parents a new home and provide financial security for you and your immediate family?
- Maybe you want to celebrate your accomplishment with an initial spending spree and then live an above-average lifestyle knowing you will need a second career to support your post playing years.
- Do you want your high income now to support you and your family for the rest of your life without worrying about a second career?
If you chose options 1 or 2. Read no further and you can fire your financial advisor. Party on!
If you chose options 3, 4, or 5 you are off to a good start! Depending on your specific situation, these goals can be achieved. Let us get to work.
Phase 3 – Implementing Your Financial Plan: Sustaining Long-Term Success
Remember that even with a plan to save and invest, you will be living a lifestyle most people only dream of.
- Begin by implementing your plan. Live within the budget you have established with your financial advisor. Do not use your new wealth to impress people. Remember that you are not using your first contract money to live fast and furious, but you are committed to living an elevated lifestyle over a long period of time.
- Then, re-evaluate. Does the budget and plan seem to be working for you? Is it time to consider buying a house? Has your situation changed? Do you now have a partner or children to support? Are you coming up for a contract renewal? Are you happy?
- Always keep your eye on the prize. By saving and investing some of your income now, you are making things easier for you and your family for a very long time.
- Imagine that your playing days are over. Do you want to have a large investment account to make your next life’s chapter more comfortable or do you want to wake up wondering why all the money, friends, and expensive things have disappeared?
Stay focused on your craft. If you have your financial plan set and you are properly invested, you can fully commit your attention to your sport. This freedom from financial worry can help you excel athletically and lead to even higher paydays.
*Disclosure: All examples in this report are hypothetical and are for illustrative purposes only. Nothing in this report constitutes a guarantee or certainty. Investing involves risk and investors can lose money.