How pro athletes should handle all that newfound wealth
Young players need financial guidance to make the most of their money
With March madness in full swing, all eyes are on a number of NBA hopefuls. For many college basketball players, the NBA draft season is a defining moment in their careers. If chosen to play at the next level, these players will experience an increase in cash flow in the form of high salaries and big endorsements. As a financial advisor, I can’t help but wonder how they will handle this newfound wealth.
The first year is tough for many players because of what I call “pent-up demand.” These players have either been student athletes or spent years training hard with limited funds. Therefore once their NBA deal is solidified, they may be tempted to immediately make purchases such as cars and/or homes that they couldn’t afford previously without considering the long term financial implications. Ultimately, it takes some athletes a little longer than others to understand personal cash flow and budgeting.
While some players save their first year’s pay, it is difficult for most to resist spending. But it’s often during the second and third years where the problems begin because unruly spending habits that began in their first year can worsen in the next. Below are a few things young athletes should keep in mind as they experience a thriving career with newfound wealth:
Seek out mentors who are former or current pro-sports athletes that have successfully balanced their careers and personal lives. They often have firsthand knowledge of how to best manage your new lifestyle and newfound wealth. Consider also getting to know the team ownership. In order to run a successful NBA franchise, team owners need a lot of business acumen. Tap into that knowledge and see how you can apply it to your own growing empire as well.
Stay focused on why you are there. It’s hard to walk into the locker room and stand next to a veteran who is wearing the latest designer clothes, driving an expensive car and “living the life.” Don’t get distracted by the temptation to keep up with your seasoned teammates.
Consider consulting a financial advisor who can help layout an investment plan and educate you for life down the road. The average career of a NBA player is a little under five years. As a rookie, your main focus is to continuously improve your skills and become a valued player on the team.
Becoming a professional athlete is a blessing that will provide many opportunities professionally; but it can also present a set of financial challenges. Your team wouldn’t go into a game without a strategy, so don’t tackle your finances without one either – your bank account will thank you later.