Dear Future NFL Alum,
With the NFL draft upon us, I thought it appropriate to write this quick note to the NFL hopefuls and draft prospects who eagerly wait to hear their name and have a chance to play on Sundays. For most of you young men, the journey has been a long one. You have been involved with football since you were a kid, endured grueling training and practices at both the high school and college levels and now it is time to reap the fruits of your labor. More appropriately to get a taste of the fame, financial security and lifestyle afforded to those who play at a high level in the League. Unfortunately, for many of our peers the glitz and glam fades quickly; Sports Illustrated once reporting that, “by the time they have been retired for two years, 78% of former NFL players have gone bankrupt or are under financial stress because of joblessness or divorce”. This is an unsettling statistic, because as a former NFL player, it is disheartening to see so many players realize a life-long dream, only to end up not being able to live with financial freedom in retirement. Let’s take a look at a few things that may help you on your journey to achieving financial freedom.
Keep It Simple
You’ve made it! You have been offered a contract and for many of you this money will be life changing. Your immediate urge may be to go out and start acquiring things (a new house, car or jewelry), taking care of the people who have meant so much to you throughout your life or trying to ‘hit a lick’ by putting money into the ‘sexy’ investments such as cryptocurrency, cannabis, private equity or real estate. To that I say, hold on “Big Fella”, don’t put the cart before the horse! First, build a portfolio of stocks, bonds or funds with a proven track record to help grow your wealth. Whatever additional investments you’re able to make in your portfolio, will potentially allow you to generate enough income to support your lifestyle in its entirety or at least partially throughout your retirement. Let’s consider your future self for a second, the guy who now has a family, is beat up from the game and is trying to find his identity outside of the game; it sure would be nice to give this guy the ability to live a work-optional lifestyle, or at least an adequate opportunity to figure out the next steps. Don’t sacrifice your future self for the pleasure of the moment.
Part of the draw of playing in the NFL, outside of love for the game, is the money. Not simply what it can provide, but also how it can change circumstances. When you’re in the thick of it, and the money is falling from the sky, signing bonuses, camp checks, game checks, workout bonuses, pro bowl bonuses, endorsements, and you have guaranteed money coming in the following year, it is easy to feel like this is the way it will always be and fail to budget and create a realistic lifestyle. Let’s say you have received 10m over your career (some will receive more, some receive less). After taxes and fees, you are probably left with about 5.8m. Let’s assume the entire 5.8m is invested, any respectable advisor would tell you to use 4% as a safe withdraw rate providing you with about 200k after taxes from that 5.8m portfolio every year in retirement. With this financial plan, you just went from living what seemed like a millionaire’s lifestyle to a middle-class lifestyle. Will you be prepared for this change? Will you take the necessary steps to bridge the gap between the income generated from your portfolio and your actual lifestyle? Will you become another statistic? Don’t bite off more than you can chew; create a realistic lifestyle that your portfolio can afford.
Find Proper Advice
I’ve heard stories of players employing their family members to provide them with financial advice, only to have those relationships end in turmoil and lawsuits. I’ve also heard stories of players taking the advice of a financial advisor, only to be caught in a Ponzi scheme of non-existent real estate deal or simply being robbed blind. If you can’t trust your family, or your financial advisor, who can you trust? When determining where to get your advice, you want to go with someone who is a fee-only fiduciary financial advisor. The fiduciary standard ensures that the advisor making recommendations and financial advice are in doing so in your best interest, not just for what is suitable for their check book. Another added layer of protection is being fee-only; this greatly eliminates any conflict of interest that may arise from how an advisor is compensated. Let’s be real, if an advisor says they are a fiduciary, but still receives commissions on the products they recommend, this raises a red flag. In addition to the fiduciary standard and fee-only services, it is also beneficial to choose someone who uses the services of an independent/third party custodian. This is essentially a higher level of transparency, an extra set of eyes verifying that your money, your investments, your future financial security is where it should be and is doing what was agreed upon between you and your advisor. Take the time to vet your advisor and make sure their philosophies align with your overall goals.
You’ve earned it! It’s your time to shine! Enjoy every minute of the draft, your career, the spotlight and success, but remember this phase of your life will come to an end. Put yourself in a position financially to reap the fruits of your labor and live a work-optional lifestyle in retirement. Your future self will thank you!!
Levi Brown, Financial Coach and Behavioral Finance Specialist, Cardinals/Steelers 2007-2013
For more on Levi, see his bio page.