Jackson Wegner – Advisor
As a starter on my high school basketball team, I was a 6’1” defensive specialist that guarded all five positions. I often matched up against opponents as tall as 6’9”, fighting to keep them out of the lane and forcing them to take tough shots. Growing up and playing across the Chicagoland area, those matchups included the likes of Jahlil Okafor, a first-round pick in the 2015 NBA draft, and Jalen Brunson, the star point guard for the New York Knicks. I didn’t always have the physical advantage, but it was an exhilarating experience to challenge those players that would go on to play at the highest level.
Today, I specialize in a different type of defense. I help individuals and families protect their wealth so it will be there to support their loved ones for generations. As a wealth advisor, I understand how many young athletes need help off the court to build strong financial habits and sustain their hard-earned dollars.
Anyone who follows sports probably knows that some athletes spend large amounts on luxury items with little regard for long-term savings. There are countless stories abound about athletes who become bankrupt or have little money available after their professional career ends.
As someone who deeply loves sports and admires athletes, I urge young athletes fortunate enough to earn large sums to consider the following basic rules of money management:
Pay Yourself First
An athlete receiving their first contract – even their first NIL payment – frequently wants to show their appreciation to those who made it possible – family members, coaches, and friends who supported them for years. For example, purchasing a home for one’s parents is a way to show love and appreciation for that support. Yet, this decision could significantly decrease the probability of sustained wealth right off the bat.
Instead, every young athlete needs to understand and focus on the big picture. An injury can end a career at any time and setting up a comprehensive financial plan to protect one’s wealth becomes critical. A comprehensive financial plan includes a budget to control spending, emergency reserves to protect against unexpected expenses, and investing a portion of any bonus or salary for long-term growth. A comprehensive financial plan will also include ways to support parents and other loved ones.
When you are in your early 20’s and more financially successful than your peers, it is difficult to maintain a long-term outlook. While there are exceptions – Tom Brady and LeBron James come to mind – even some of the best athletes have relatively short careers. A goal for all young athletes should be to take earnings from a career that will last a decade or less into a lifetime income stream, allowing them to experience a lifestyle they have dreamed of.
Spend a Minimum Amount on Non-Essential Items
Athletes are often featured in social media wearing expensive clothes or driving luxury cars without having thought twice about the purchases. A financial plan can provide for such luxuries while implementing a sound strategy for sustainable wealth.
Former NFL star Rob Gronkowski is well-known for only spending money earned from sponsorships and endorsements – he never spent any money from the salaries he earned while playing football. Many athletes will not secure large endorsement contracts, so they must have financial discipline.
Former Denver Broncos wide receiver Rod Smith says one way that young NFL players get into financial trouble is by attempting to keep up or fit in with the financial status of other players in the locker room.
In a Forbes magazine story, Smith says: “I didn’t come into the NFL with money. I started on the practice squad making $60,000 my first year. It was a whole lot of money to me, but nothing in comparison to the lifestyle of the guys I was around in the locker room. I was making $3,000 a week and people around me were making $100,000 per week. You could get caught up in that.”[1]
Set Aside Enough Money for Taxes
Young athletes coming into professional sports are typically not accustomed to paying taxes. However, a young athlete who earns $1 million annually could potentially owe up to 40 percent of their income in state and federal taxes. This could leave them with closer to $600,000 per year of income, not the $1 million they thought they could spend. While there is often still plenty of money left even after paying basic living expenses, the cost of luxury items and undisciplined spending can easily eat up much of an athlete’s earnings. Then, when it’s time to file tax returns, there may not be enough money available to cover tax liability.
Work with a Certified Financial Planner ™ Professional Team That Specializes in Sudden Wealth
Few people in their 20’s, no matter their profession, have sophisticated knowledge of money and finances. A strong financial advisory team should help you understand how to protect your earnings and make money work for you. Some of my best clients are those who are engaged in the financial planning process – they want to know the details of their financial plan and how the plan will help them become financially independent after their career ends. Never be afraid to ask any question about money – after all, it’s yours.
Meet with Our Team
For young athletes and their family members with questions or who would like more information about a financial plan for your retirement, feel free to contact our team.
We offer a free consultation to discuss how a comprehensive financial plan can enable your wealth to grow.
[1] https://www.forbes.com/sites/aliciajessop/2012/10/31/not-broke-how-nfl-players-stay-financially-stable-after-the-game-ends/?sh=4e8c395e467e
© 2022 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. An index is an unmanaged portfolio of specified securities and does not reflect any initial or ongoing expenses nor can it be invested in directly. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
