Many athletes have come and gone. Many have made unthinkable amounts of money and many have lost unspeakable amounts of money. A lot of professional athletes, lacking time and the right advisors end up losing the fortunes they make. Oftentimes, they lose their fortunes and end up in significant debt. Their experiences serve as great lessons for the rest of us who would like to make and keep a sizeable nest egg. Professional athletes finance lessons provide a treasure trove of information.
Prioritize Your Income
Athletes get paid a lot for many reasons. One of such reasons lies in the fact that their careers are usually very short. An NFL player , on average, plays professionally for three years. Injuries cut short the careers of a lot athletes. As a result, income sources are cut short earlier than expected. In a similar vein, the average Joe’s career can be easily cut short due to unexpected events such as economic downturn. Both professional athletes and an average worker can gain from placing priority on hedging against the risks of losing their income source. Insurance helps with this. Disability insurance, for example, can help an individual who finds themselves swarming in the consequences of a life-changing injury.
Differentiate Between Priorities
Prioritizing your income is one thing. Prioritizing what you do with your income is another. There are many great reasons to use your income to cover your current costs but there are also many reasons why your habits could be wrong. Some priorities are more time-sensitive than others. For example, many people choose to use their income to help friends, family, and save for the education of their children.
A lot of athletes make it to the top of the income tree and suddenly fall under the notion that they have to save everybody. It’s great to help others in need. There is nothing like good charity. However, people will always need help, regardless of how much you give. You need to ensure that you are able to satisfy your needs. Financial experts strongly vouch for saving for retirement before trying to meet other needs like college savings. There are many free resources to satisfy other needs such as student loans and scholarships. There are no retirement scholarships.
Pay Attention to Different Details
Despite their high caliber of talent and performance, a lot of professional athletes find themselves with the wrong end of the stick due to poor attention to details on their finances. From trusting the wrong financial advisers, to missing out on fine print, a lot of money has been lost by professional athletes as a result of lack of attention to detail. With very little time to review business and financial dealings, athletes often find themselves in grey spots. For this reason, a growing number of professional athletes are choosing to seek the services of sports management companies and trustworthy financial advisors.
The average Joe has to find a balance between spending significant amounts of money on a financial advisor or asset manager and having enough money to invest and save. There are a lot of free resources available online to gain the knowledge necessary to develop a keen eye for detail in financial dealings. From Google Books to YouTube, a treasure trove of information is freely available to help you to truly know the ins and outs of your finances. An increasing number of free finance management tools are available online to save you time in assessing your finances.
Equipped with free tools, books, and knowledge, you can be better prepared to not only assess data more effectively but also to look beyond the numbers. The sporting world isn’t short of stories of professional athletes being misled by their accountants who showed them the data. An ability to look beyond the numbers will ensure that certain details do not go past you when dealing with your finances.
Have a Plan B
As the saying goes, ‘You need to break a few eggs to make an omelette’. Proffesional athletes are not strangers to bad business deals. From restaurants with quirky menus to new holiday destinations that are too expensive for the average Joe to afford, there’s a flood of business ideas which look good on paper but are bad in reality.
It’s not only professional athletes that invest in bad business ideas. A lot of investments go wrong. Business is a tough sport, especially in uncertain economic times. With that in mind, it is important to have a plan b. A plan b is one of the best ways to be more creative with your business endeavours while also keeping assured of your personal finances.
A plan b may include significant low-risk investments such as government bonds, land, gold treasury bills, and stablecoins. If one has enough investments in a diversified portfolio of low-risk assets, they have less to worry about when trying to make more money with higher-risk investments. In order to be able to invest in low-risk investments, one needs to build up enough capital by following the other lessons learned from professional athletes.
The Marathon of Finance
Making money is a marathon, not a sprint. Unfortunately, many professional athletes in recent times have entered their sectors with the pursuit of money in mind, much more than passion or sporting glory. They often forget that the windfall of cash that follows entry into a league is only the beginning of a long journey in financial freedom.
Planning is not enough. Many athletes have financial plans that don’t hold water in tough times. Non-athletes also fall victim to weak financial plans. Whether you have come across a new job, a new business opportunity, a new windfall of cash or other source of income, it is important to understand the parallels between the sporting world and finances. Regardless of how many wins you make, it only takes a few bad decisions to ruin everything. As statistician, Nassim Nicholas Taleb reminds us, “It takes five years to learn how to make money; and twenty-five to learn how to not lose it.”.