By Manka Kaur, CFP ® CRPC ® CDFA ®
Financial Advisor
Ameriprise Financial Services, Inc.
Only a handful of athletes ever reach the pinnacle of playing sports at a professional level. For those who manage to make it reality, there are significant financial considerations that should be taken into account. For starters, athletic success typically happens relatively early in the pro’s adult life, at the same point most others are just beginning their careers and earning far more modest sums. In the case of athletes however, there is a big catch – the sudden boost in income isn’t likely to last as long as they may think. If you or your child has hopes of becoming a pro athlete, the following tips can help manage a potential large windfall and salary responsibly:
- Remember this earnings power likely won’t last forever. There is the potential, depending on your ability, opportunity and money management, to earn enough to be financially set for years – or even decades – to come. Yet for most, the amount of time spent in the pro sports spotlight is limited. Age, injuries and the elite level of competition are challenges that can cut any career shorter than you planned on. If you are dreaming of becoming a pro athlete, remember that it’s possible that your 20s could be your peak earning years. Develop a financial strategy with this in mind.
- Live within your means. When you sign a large contract or receive your first paycheck, it’s exciting to dream about how to spend the money. Before you make your first purchase, take a moment to prioritize your financial goals. Do you want to put down roots and buy a home? Replace your car? Upgrade your electronics? Knowing what’s important to you can help you make purchases today with confidence – while also being mindful of creating spending habits that are realistic and sustainable once you retire from competing at the highest level.
- Wait until the money lands in your bank account before spending it. While this step may seem obvious, it’s easy to feel like a certain bonus or the next paycheck is guaranteed when you’re flying high. Professional sports are notoriously fast-changing, and you need to be aware that it is possible for an injury or new game plan from your coach to affect your playing time – and paycheck. Form the habit today of ensuring you receive the money before you spend it.
- Spread your wealth sustainably. No matter the size of your paycheck, it’s important to be thoughtful about who you give money to. If you have a strong desire to help family, friends or charities, take the time to decide when and how much you are able to contribute. And, keep in mind that it’s common for athletes to have various family members, acquaintances or nonprofits ask for money. Establishing clear giving priorities can help you manage requests in a way that makes you feel like you are making a difference – while also ensuring your generosity is sustainable years into the future.
- Protect your future. Given what may be the short span of your professional career, start saving for retirement as soon as you can. While many professional athletes transition into another career before retiring in their later years, setting aside savings when your income may be the highest can help you establish a solid nest egg. Additionally, consider updating or creating an estate plan to assure if anything happens to you, your wealth is passed on to your desired beneficiaries in a tax-efficient manner. At a minimum, your estate plan should include a will, beneficiary designations on all accounts and a health care directive that clearly states your wishes in case of an injury.
- Find qualified professionals to help. The financial and legal aspects of contracts and income can be complex for professional athletes. Surround yourself with trusted professionals who have the expertise and experience to help you make decisions with confidence. Your team of professionals may include an agent, lawyer, tax attorney, estate planner, business manager and financial advisor. As you hire professionals, make sure you understand how each gets paid and their process for providing you with recommendations.
Manka Kaur, CFP®, CRPC® is a Financial Advisor with Ameriprise Financial Services, Inc. a Platinum Financial services practice of Ameriprise Financial Services, Inc. in Atlanta, Ga. She specializes in fee-based financial planning and asset management strategies and has been in practice for 18 years.
Review her website at https://www.ameripriseadvisors.com/manka.x.kaur/, or call Manka at 404-840-6418, or contact her by mail at 3490 Piedmont Road, Suite 1005, Atlanta, Ga. 30305.
Ameriprise Financial Services, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.
Investment advisory products and services are made available through Ameriprise Financial Services, Inc., a registered investment adviser.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
© 2019 Ameriprise Financial, Inc. All rights reserved.
[maxbutton id=”2″]