Financial Lessons From specialized Athletes

Allan Iverson was once regarded as one of the best and highest paid athletes in the world – making more than $150 million dollars in salary alone in his 15 years in the NBA. In 2012, both CBS and Forbes reported that he was in thorough financial trouble and unable to pay his debts.

Unfortunately, stories of the hapless specialized athlete who is soon separated from his money are quite shared. Sports Illustrated reports:

  • Within five years of retirement, 60% of all former NBA players are broke
  • 78% of NFL players have gone bankrupt or are under financial stress because of joblessness or divorce

specialized athletes are often pitied and cast as financially ignorant and unable to manager their money. But in reality, we – the non-athletically talented – struggle with our finances in addition. The average savings for a 50-year-old in 2013 is $43,797*. Not exactly a homerun. So how can we be successful with our finances? By following these five tips and staying out of the traps that so many people fall into.

Money is finite – use less than you make.

This seems too simplistic, but people struggle with overspending. Begin by creating a budget. Come on, a budget won’t kill you. buy a budgeting system like Quicken, go online to free sites like or simply write down all of your monthly expenses and other bills you pay intermittently. Then look at your income and use less than you make.

Save your money.

Make sure to allocate money on a regular basis to create an emergency fund equal to three-to-six month’s expenses. Then invest the balance towards longer term investments. You cannot create wealth if you do not save.

Boring investments are just fine.

Athletes are notorious for making poor investments. Private investments have a place, but public investments are certainly much less likely to be involved in a fraudulent transaction or lose all of their value. Exxon will likely be around in 10 years; your uncle’s new sports bar – maybe not. Begin by investing in diversified mutual funds or exchange traded funds that buy stocks, bonds and real estate investment trusts. Once your public portfolio grows to a substantial piece of your net worth, you can then venture out into higher risk and less liquid investments such as private equity, energy or real estate. Always understand your downside risk. Could you lose all of your money and be liable for other debts beyond your initial investment?

Pick your financial advisor carefully.

Good financial advisors can be a blessing and inept or unscrupulous advisors a curse. Where will your advisor keep up your assets? A well known custodian such as Fidelity or Schwab is basic. Never write a check directly to your advisor! Is your advisor credentialed? Certified Financial Planner, Certified Private Wealth Advisor and Chartered Financial Analyst are a few of the more noticeable designations. Are they experienced? Have you checked them out on the SEC Web Site or FINRA Web Site to look for criminal charges or disciplinary actions? Have you talked to references that have worked with the advisor for many years?

Pick your spouse already more carefully.

The best way to cut your balance sheet in half is to get divorced. Pick your spouse or meaningful other carefully. Not married – you may nevertheless have to divided assets if you have ever held yourself out as a married associate or lived together for a certain period of time.

Many of us struggle with the same financial bad habits as specialized athletes. Their tailspin is just more emotional. Following these five basic tips will help you build up more money and have less stress in your life, creating a win-win situation in any game.

Stanley Bae, Michael Shockley and Mark McClanahan are managing directors with the wealth management firm RGT.

*statistical brain

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