EVERY ATHLETE HAS A CHOICE WHEN IT COMES TO MONEY
SO YOU’RE going to be a professional athlete. Congratulations! Now proceed with caution. A professional con- tract likely brings fame and wealth. In reality, you’re closer to bankruptcy than at any other point in your life. Does that send chills up your spine? If not, it should.
Seventy percent of professional athletes are likely to go bankrupt within a few years of their first professional deal. Some of the most recognizable athletes …
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who’ve filed bankruptcy include: Allen Iverson, Mike Tyson, Terrell Owens, Evander Holyfield, John Daly, Sheryl Swoopes and Marion Jones.
The onslaught of financial issues isn’t limited to race, reli- gion, gender or even age — but is caused by sudden wealth.
What is sudden wealth? According to David Rust and Shane Moore — Austin-based wealth managers and the authors
Sudden Wealth, it Happens and Sudden Wealth, Blessing or Burden — sudden wealth is defined as suddenly being personally responsible for more money than you’ve ever had before. The concept of an athlete turning pro represents just one example, but it can also happen as a function of selling a business, winning the lottery or receiving an inheritance. In the Dec. 2012 Examiner. com article, “70% of Top Athletes GO Broke!” by Bill Wardell, professional athletes will end their career in one or all of the following states: bankrupt, broke, divorced or unemployed.
Sports Illustrated stated that, “most retired football players have money troubles. After they’ve stopped playing for two years, 78 percent of for- mer NFL players are bankrupt or in financial trouble. Sixty percent of NBA players go broke within five years of retirement.”
The reasons vary, but in most cases issues arise around the individual’s inability to manage the moment. Examples include:
• Not living within their means by living an excessive life style.
• Not budgeting.
• Not setting retirement goals.
Marriage and divorce. People need to also consider child support and college educational
• Gambling.
• A personal entourage of friends and family who depend on you financially.
• Hiring your friends or fam- ily members as an agent, financial advisor or accountant “because you think you can trust them.” Generally, they have no formal education in the financial man- agement field and can provide zero value in managing financial matters.
• Making poor business in- vestments.
Sudden wealth is a blessing and burden.
While many of us dream of becoming wealthy, the challenges are numerous and shouldn’t be taken lightly. In a Horns Illustrated interview with Moore and Rust, they expressed the need for restraint as without proper planning “those funds can evaporate quickly.”
“We remind sudden wealth recipients to be careful what you wish for,” they said, “sudden wealth can bring with it a com- plex variety of tax ramifications, friends and family expectations, personal desires and justification. It can bring out the best and worst of a person in the moment, as well as cause resentment and a sense of entitle- ment or ‘you owe me’ mind set.”
Do’s and Don’ts regarding sudden wealth.
Many sudden wealth recipients feel pressure, or the need to help others, especially family and friends. There are ways to accomplish for your financial goals without making fam- ily dependent on you, or creating a long term entitlement situation. Let’s use a sports analogy.
A head coach relies on assistant coaches, coordinators and position coaches. Similarly, there are financial advisors who have experience in handling the intricacies of sudden wealth planning. This type of advisor act as a positions coach (think investments, financial planning or life insurance) and as a coordinator for the
rest of the coaches you will need on your team (think legal, taxes, banking, proper & casu- alty insurance, psychology). A good team will work together to create a financial road map to lead you down a construc- tive path in handling your new wealth and eliminates the abil- ity for one member to take advantage of you.
Above all, the most impor- tant member of this team is you. Remember, as a sudden wealth recipient, you’re likely closer to filing bankruptcy now than you’ve ever have been.
Congratulations on your opportunity, be smart and best of luck.
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