Although their careers may not initially resemble office jobs, professional athletes share similar financial needs with the Americans who watch them play. They have opportunities to earn, build wealth and save for retirement. Making smart choices early on can bring benefits later, especially if they face an unexpected event or see a dip in their income. With that in mind, there are numerous lessons to draw from these professionals when it comes to retirement planning.
Use these strategies to set money aside for the future like an athlete:
— Learn financial basics early.
— Align your interests and goals.
— Make a financial plan.
— Be ready to change careers.
— Prepare for life-changing events.
[READ: How to Retire at 65 With $2 Million]
Learn Financial Basics Early
Starting with the first contract and paycheck, it’s essential to monitor funds. “Professional athletes should run their career like a business by understanding financial statements such as balance sheets, income statements and equity,” says Michael Olivia, a financial planner and senior partner of WestPac Wealth Partners in San Diego. Olivia is an NFL Players Association Registered Player Financial Advisor, and he works with NFL players and other professional athletes.
Over time, athletes can monitor changes to their income and expenses. “They should know how much money is coming in, how much they are spending, how much goes to debt and taxes, and how much they have left over for saving and investing,” Olivia says. These steps can help guide decisions regarding large purchases like homes and vehicles, along with smaller items such as groceries and clothing. Checking where every dollar goes often makes it easier to follow a budget. “This can help reduce impulse purchases and extravagant lifestyle choices,” Olivia says.
Align Your Interests and Goals
Off the field and away from work, it’s critical for athletes to consider their priorities. “I realized very quickly during my 10-year NFL career that football would not provide me the financial nor total personal intellectual gratification, which I knew I would need to sustain my lifestyle and that of my family,” says Reginald W. Wilkes, senior vice president of wealth management and senior financial advisor at The Wilkes Sports Group at Janney Montgomery Scott LLC, in Bryn Mawr, Pennsylvania. “Thus, I almost immediately thought of the end at the beginning.”
There are often many considerations, based on lifestyle preferences and family situations. “It was not only planning for life after football from an educational standpoint but also from a financial perspective, considering kids and a wife just entering medical school with tuition bills and the like,” Wilkes says.
Make a Financial Plan
Since income for professional athletes isn’t always steady, thinking about how it will be used can help make it sustainable. “Developing a financial plan is the key and should include a discussion around the three phases of your financial career as a professional athlete,” Wilkes says. These phases are cash accumulation, transition and retirement.
While bonuses and additional contracts could come, keep in mind there are no guarantees. “For my team, it is easy to discuss a five-year plan, discussing the outcomes of the first contract but viewing it as the last contract,” Wilkes says. This often makes it easier to plan for the long term. Sitting down as a family and with a professional can help you map out a strategy that works best for your household.
Be Ready to Change Careers
After starting a family or moving into a different stage in life, professional athletes may look for other work opportunities in their 30s or 40s. Marshal Davis, president of Ascendly Marketing in The Woodlands, Texas, was a professional baseball player with the New York Mets organization. After his sports career, he spent time as a financial planner to help other athletes.
“I worked with them to create a second career strategy, where they invest time and money during their playing days into developing skills for a second career post-retirement,” Davis says. “One of my clients invested in culinary courses during his playing days and now owns a successful restaurant.”
If your current job leaves you feeling drained, or you find yourself interested in a different career path, you might spend several hours a week looking into your options. You may find evening classes or online courses are available in an area you’re passionate about. Trying out a side hustle could help you see if you enjoy something else, and you may get an opportunity to move into it full-time if the business progresses.
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Prepare for Life-Changing Events
Athletes may love their sport for a lifetime, but they might not actively participate in it for that long. “Unfortunately, a career-ending injury is common in many professional sports,” Olivia says. Disability insurance can provide a layer of protection, as it will provide guaranteed income if a physical condition impedes the ability to earn wages. Life insurance coverage may be a help too, because policies could include access to cash value during an individual’s life if needed.
When you look ahead, think of unexpected challenges that could bring changes to your routines. “Personal risk management is essential in any sound retirement plan,” Olivia says. You may decide to build an emergency fund with three to six months of income in it. Or you might set a goal to contribute the maximum amount to your employer-provided retirement account each year.
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What Former Pro Athletes Can Teach You About Saving for Retirement originally appeared on usnews.com
