Top 5 Financial Mistakes New Athletes Make
As a new athlete, it’s easy to become distracted by the glitz and glamour of your occupation and new money. While it seems like there is no financial shortage now or for the foreseeable future, many athletes make common mistakes that can get them into financial hardships. Whether it’s being surrounded by the wrong people or not having a long-term plan, these mistakes can multiply long after a player’s career is over. Below we outline the five the most common mistakes we see among professional athletes.
- Failing to engage a financial advisor early in their career. Notice we said, “financial advisor,” and not an agent. While it is easy to find a financial advisor, it is of the utmost importance to find a qualified one. Athletes are much different than the common client of most financial advisors. It is important to find a financial advisor that has experience working with athletes. Finding a good financial advisor and CPA team is crucial for an athlete’s money management.
- Ignoring tax planning opportunities. Tax planning is key when it comes to an athlete’s financial well-being. Hiring a CPA that has a good understanding and experience with athletes can keep more of an athlete’s money in their pocket. A CPA may be able to recommend various ideas such as establishing residence in a tax-advantaged state, understanding and implementing tax strategies suited to the athlete’s unique situation, and help timing income and deductions into certain tax periods to obtain the most tax advantageous results.
- Not thinking about the long-term. While it may seem like a very noble cause to buy everyone in your family a new home or Cadillac, it is most likely a poor financial decision. Rather than an athlete investing their new fortune in their future, they may spend it living lavishly with multiple cars and mansions that can house a small village. There are countless stories of athletes supporting very extended family and friends due to their sense of responsibility. An athlete must remember to stick to their personal long-term plan and protect their financial future.
- Failing to realize just how short their playing career may be. Some athletes do not take into consideration that they may only be playing for 5, 10, or 15 years or less to financially prepare themselves for the rest of their lives. That scenario doesn’t take into consideration the possibility of injury that may cut an athlete’s career much shorter than they ever anticipated. For most athletes, they won’t get an opportunity to make this much money again in a second career.
- Taking investment advice from or investing with former teammates and players. Many athletes will feel as though they might as well invest the same as their teammates. While there are many former players that are qualified to give financial advice, it is very important to consult a trusted financial advisor to ensure you’re making the best financial decision for your situation and goals.
It’s important that athletes take notice of the financial woes that their peers have encountered. While there are many financial mistakes new athletes can make, almost all of them can be avoided by hiring a trustworthy team of independent advisors. The Anders Sports, Arts & Entertainment Group is experienced in working with athletes and helping them navigate specific financial situations. Contact an Anders advisor to learn more.