Why Professional Athletes Benefit From A Financial Plan
A financial plan isn’t a ‘nice-to-have; it’s a ‘must-have,’ especially for professional athletes. Most athletes are recruited at young ages and retire younger than the average person, making creating financial plans and setting goals much more important.
You need a solid game plan to ensure that you can accomplish your short-term and long-term goals.
But how do you know if your plan is a home run? Let’s explore why professional athletes benefit from a financial plan and how you can get started.
Set clear goals that make for a remarkable financial future.
Often, athletes become wealthy very suddenly and relatively young. Unfortunately, this can also mean their sole goals up until this point were career-based! It’s taken years of growing their skillset and career to have finally “made it.”
Now that you’re a professional athlete, it’s time to clarify your goals and values off of the field. Ask yourself some critical questions like:
What do you want to do when you retire from the game? Likely, you won’t participate in the sport professionally forever. There will come a time when your body can’t do it anymore. Perhaps you may want to travel, visit family, donate your time, etc. The options are limitless, but you need to think about what interests you so you can bake it into your financial plan. There is an old saying: “Failing to plan is planning to fail.” Make sure that does not apply to you.
Do you want to start a family? If you wish to start a family soon or already have children, how do you want to support their endeavors and education within your financial plan? Maybe you want to pay for college, grad school, or study abroad trips. They may not have been blessed with the same athletic skills you have. You want the best for them, so to achieve those goals, you have to plan for them - and it is never too soon to start the planning process.
These are just a couple of examples of conversations that we discuss with our athletes. You need to think beyond the next 3-5 years and create a specific lifestyle plan that leaves you feeling fulfilled. When you have clear goals and stepping stones to get there, you can’t lose.
Your financial planning team can help you reverse engineer a strategy to accomplish these goals and help you pivot as necessary.
Take advantage of valuable tax benefits and work to increase your wealth.
With great wealth comes great responsibility—and taxes! The right tax strategy can help athletes keep as much of their earnings as possible and effectively build their wealth.
For high-income earners, being strategic about where you live can help reduce your taxes. For example, residing in a no-tax state like Florida or Texas can save you a lot of headaches.
If you are fortunate enough to have achieved a spot in pro sports with a high income or sudden “windfalls” (like a signing bonus), you may face some hefty taxes. However, taxes from a player's signing bonus only correlate with the state they reside in. So, if that state doesn’t utilize income tax, you’d be saving a lot of funds that can be used elsewhere. Savings from state taxes alone would go a long way to pay for college!
There’s also something called the “jock tax” that throws a wrench into the mix. The “jock tax” means that an athlete will pay different tax amounts in different states depending on where they travel for away games and the state tax in those areas. It’s a hurdle, but it’s something that athletes need to prepare for financially.
A financial advisor can help you create a strategy for your wealth that seeks to minimize your tax impact and helps you hold onto your hard-earned money. There are a lot of hoops to jump through, but when you work with an advisor that understands professional athletes - I was one once myself - it helps to maximize the probability of achieving the financial dreams you likely have for yourself, for your family, and for the future of all those you care about.
Organize a strategy that embodies your competitive goals with a backup plan.
You’ve finally made it to the world of pro sports; you should be able to enjoy your wealth now or accomplish other short-term goals you’ve always wanted to pursue. Maybe you’ve dreamed of a home with a big yard—now that dream can become a reality.
We briefly talked about retirement and how important it is to set a goal age to start living out your golden years. But the tricky part is preparing for it. Retirement is a massive financial commitment, and depending on your goals, you may need to save more than the average person. Those who don’t plan for it inevitably regret it - “If only I had started planning sooner…”
Something that no athlete wants to think about, but is a possible outcome, is getting injured and being unable to compete. If that happens, you need to have a backup plan, so you’re not scrambling trying to care for yourself and your family. That’s why athletes need a financial plan not just for retirement but for safety and security if the original plan can’t be carried out.
Aside from retirement, it’s easy for young athletes to get blinded by their wealth. While buying homes and fancy cars may feel good in the short term, it may drastically affect your long-term goals. Even athletes need to live below their means.
A financial plan can help you leverage your wealth to live in the moment while protecting your future.
Work with a team you trust.
All professional athletes need a financial plan and strategy that is unique to them and carefully crafted to withstand the test of time. No matter where you are in your financial journey, our team at Pro Wealth can create a plan to accomplish the goals and values that mean the most to you. Take the next step to achieving your dreams off the turf.