Pro Athlete? Here’s Why You Need a Financial Plan and What Should Be in It

Pro Athlete? Here’s Why You Need a Financial Plan and What Should Be in It

by Robert Abramowitz
May 04, 2023

As a professional athlete, it's easy to live in the now. You’re busy training and playing, traveling and being part of a high-energy, competitive environment. But retirement from your sport is inevitable. What will happen then?

We’ve heard the story far too many times: An athlete achieves fame and fortune at a young age, only to meet with financial ruin due to some combination of lavish lifestyle, bad investments or simply bad luck. From Mike Tyson to Boris Becker to Warren Sapp, the cautionary lesson is clear — When you don’t have a strong plan, it’s far too easy to outspend your resources and get blindsided by unexpected life events.

Can you preserve your wealth for yourself and your family and still enjoy the good life during your retirement? Of course! It all starts with a deliberate financial strategy.

Why Professional Athletes Need to Start Planning Early

Young athletes often don't dedicate time to preparing for the many years they will have after they retire from the sport. But financial planning is actually even more important for athletes due to their relatively short career spans and the early age at which most players reach their peak earning potential.

Think of it this way: You trained long and hard for a successful sports career. Your post-retirement career deserves just as much hard work and preparation — especially given the ever-present chances of a sudden, career-ending injury.

A financial plan drawn out early in your career will provide you with a clear financial roadmap so you can meet your goals and avoid unpleasant surprises.

What a Good Financial Plan Looks Like for Professional Athletes

An effective financial plan provides you with insight into three main areas of your financial life:

  • Your income and how you budget for expenses
  • How you need to save and invest to protect your assets
  • Strategies for reducing your risk

Income and budgeting

When you’re constantly on the road, focused on your athletic career, it can be hard to keep track of your finances. If most of your regular expenses are set up on autopay, you might not have a good grasp of how much you’re really spending each month. A financial plan helps make sure your money is there for you when you need it — both during your playing years, as well as when you retire.

Knowing what kind of income (if any) you can look forward to after retirement is a crucial piece of your financial planning puzzle. This is one reason why it’s important to start thinking about your post-retirement career as early as possible, ideally during your college years.

Alongside your income, your financial plan also looks at your expected expenses now and in retirement. One approach is to bucket expenses into three categories:

  • Essential spending includes the monthly expenses necessary to maintain your standard of living. It includes all your housing, food and clothing expenses — within reason.
  • The discretionary category is for big-ticket items, such as an annual vacation, designer clothing and high-end cars.
  • The third bucket is for aspirational items. Maybe you dream of owning a yacht or even a villa in the south of France. Don’t be afraid to dream big! The next part of the plan creates a strategy to make your dreams a reality.

Saving and investing

With your spending buckets solidly in place, you and your financial advisor will look at how you save and invest to protect those funds. If you already have a post-retirement career lined up, then your plan will look at how much income you can reasonably expect during your retirement years.

If your expected income will not be enough to cover your expenses, then you will need an asset allocation plan that ties your investments to each bucket.

  • Money that’s tied to essential expenses should be as bulletproof as possible, so it should be invested conservatively.
  • Funds pegged to discretionary items can be invested a bit more aggressively since you can more easily forgo those expenses in a bad economic cycle.
  • When saving and investing for aspirational goals, you take big risks in pursuit of outsized rewards. For example, if your early-round investment in a tech startup pays out at 100 times your initial investment, that’s when you get to realize that dream of owning a French villa.

Keep in mind that investments, often key to making future financial goals a reality, reduce your cash flow today. This is one reason why you need a holistic financial plan with a balanced portfolio tied to your short-, medium- and long-term financial goals.

Reducing risk

The final piece of the financial plan considers risks. What are your goals, and what life events might derail your progress towards them? For example, your plan might show that you need to earn another $5 million during your remaining playing years. What if you get injured tomorrow? Insurance, including a good disability policy, will be an important part of your plan to protect your financial health.

Professional Athletes: Start Planning for Retirement Early and Revisit the Plan Regularly

Achieving your financial goals takes deliberate planning. A financial roadmap doesn’t guarantee results, but it does help you keep your eyes wide open by establishing a healthier relationship between you and your finances.

Expect your plan to evolve along with the inevitable twists and turns of life. You’ll want to sit down for a financial review at least once a year, as well as whenever you sign a new contract or reach other significant career milestones.

Finally, surround yourself with a strong financial team. Investment advisors, attorneys, accountants, insurance agents and estate planners are there to help you score the best financial outcome during and after your sports career. If you also have a business manager, they can act as the point guard of that financial team by helping you organize, execute and adjust the plan, and coordinate with other advisors.

When you do all these things early on in your career, you create more stability for your post-sport life — and better ensure that you can continue chasing your dreams.

To take control of your personal financial game and set yourself up to scale new heights of financial success now and in retirement, contact our Business Management team.

Stay In Touch

Sign up to stay up-to-date with the latest accounting regulations, best practices, industry news and technology insights to run your business.

Related News & Insights
Family Limited Partnership Solves Complex Real Estate Reporting With Help of Family Office Team
Case Study
A trusted collaboration with in-house staff yielded stronger recording and reporting for 30+ properties.

February 17, 2022
NCAA Name Image Likeness Changes Athletes Business Management
Amateur athletes now have more income opportunities but need to learn the skills to save, invest and spend wisely.

August 24, 2021
Film Production and Others, Beware 163(j) Business Interest Expense Changes
Plan now because the tax impact to businesses and investors hits in 2022.

April 21, 2021