In addition to budgeting, a professional athlete should consider planning for injuries and dwindling paychecks. A safety net is essential for athletes paid only during the season, as they may need to find additional employment to keep their paychecks coming in the off-season. This article will look at the key topics that a financial planner professional athletes should address. It also talks about how crucial tax preparation is. Read on to find out more about it.
Athletes who make a good living should understand their income and expenditures. As a young person in the spotlight, an athlete may not worry about their financial future, which can easily lead to lifestyle creep. In addition, because athletes move around the country frequently, outgoings can quickly mount to unsustainable levels. However, if athletes understand their financial situation, they will be more in control of their finances in the long run.
One of the most important elements of financial planning for professional athletes is to keep track of every dollar that the athlete earns. This can be done by tracking their fees and brand endorsements. Also, it is important to budget for large expenses, such as traveling to competitions and staying at hotels. Saving aggressively is a good idea, especially in the early days. The athlete should have an emergency fund for such situations as these.
The best advice for professional athletes is to diversify their portfolios. While most athletes accumulate large amounts of wealth in their lifetime, their careers typically are short. That means that they have little time to spend before retirement. Athletes should also consider early distributions and the volatility of their salaries. They should err on the side of safety rather than risking too much money on equities, as losing a great deal of money during the early years of their career can prove disastrous.
Many financial advisors recommend that athletes allocate 70% to 80% of their portfolios to income-producing bonds and stocks. However, some athletes may be mistaken in believing that stocks are bad investments. An advisor can show athletes similar risks and help them avoid them in the future. For example, the athlete can begin exploring alternative investments if the portfolio is worth US$7.5 million. Once the athlete has accumulated at least US$7.5 million, the financial planner can start looking at alternative investments.
Managing your cash flow is crucial to a high-income athlete’s financial security. While a high-level sportsperson can enjoy exciting earning potential, injuries or illness can cause a drastic drop in income. Therefore, it is essential to create a financial plan to account for changes in income or even plan for retirement.
Investing in various assets is crucial. If the athlete has a lucrative career, consider investing in various assets. A well-diversified portfolio spreads risk across different assets. However, if you only own one type of asset, you’ll be left vulnerable to that single market’s fluctuations. Also, take advantage of tax wrappers and seek independent financial advice to ensure your future financial security. Athletes should also seek the advice of a financial adviser to ensure their financial future is protected.
To prepare for retirement, professional athletes must think beyond their immediate financial future. Instead, they need to consider what they want to do with their time when they are no longer in the game. After all, they’ve made millions of dollars, but it’s not too early to think about the next phase of their lives. Depending on what they enjoy, this may include building a business or starting a new career.
While retirement planning isn’t just about saving money for your old age, it’s important to remember that many pro athletes don’t take advantage of the tax advantages their current investments offer. Instead, they typically rely on default retirement plans, which may not be as advantageous as they think. The best way to plan for the future is to use a goal-based financial plan and establish a goal-oriented one. Achieving these goals will prevent early success from leading to poor financial habits later.
One of the key elements of financial planning for professional athletes is managing relationships. Athletes can be tempted to make poor investments because they trust people they don’t know. Some of the best business ventures can go bad due to dishonesty or incompetence. Sometimes an athlete will give away their money to support family members or hangers-on. A good financial planner can help an athlete manage these relationships.
Professional athletes often have limited experience managing their finances, making it imperative that their financial planners be well-educated and adhere to strict guidelines. While it may seem impossible to manage the relationship, success in financial planning for professional athletes requires a collaborative approach to achieve mutual goals. Financial planning for professional athletes is vital in reaching financial independence and creating a comfortable life for themselves. However, many challenges can arise when managing relationships.