Prepare for Bankruptcy
We came across this video with statistics on the amount of athletes that hit bankruptcy after retirement, and the number isn’t pretty at all. Given the fact that three out of four athletes and entertainers are unlikely to maintain their wealth for a lifetime, the time to wisen up is now.
Hence, we share with you a few things to keep in mind:
1. Assume Then Prepare for the Worst: It’s so easy to think that you can never deplete your bank account of six to nine digits. However, 78 percent of the NFL along with 60 percent of the NBA retirees have proven that you can do so. Therefore, you’re better off facing reality and preventing the problem rather than ignoring it. If you didn’t come from a money savvy family and do not associate yourself with wealthy friends and family, then assume you are a likely target for bankruptcy.
2. Keep Your Spending to a Percentage: Just because your salary for the year may reach $15 million, it does not mean that you should go out and attempt to spend the entire salary. It’s guaranteed that you will not be making $15 million thirty years from now. Seek to spend less than half of your yearly income. By dedicating at least 33-50% of your income to retirement, you’re insuring that you probably will not die broke.
3. Keep Your Giving to a Percentage: This was one of the discussions in the video. Athletes and entertainers are notorious for giving generously to friends and family. They enjoy traveling with an entourage, entertaining, and buying the world for those around them. They can even make the mistake of investing in their friend’s crappy business idea with poor business acumen. A) You should never throw money at a wall. Thoroughly research your friend’s reason for needing the money, ensuring that it statistically promises the money you’re loaning plus interest. B) Vow to tie up a certain percentage of investments with your money at one time. Perhaps you’d like to donate a certain percentage of your salary to family, charity, friends, etc. After that amount is used up, refuse to give out additional donations (unless there’s a tax exemption from the donation). If necessary, opt to donate your time/ expertise instead of money once you’ve reached your quota.
4. Automate Your Savings: Depending on your needs, pair up with a financial advisor to set a budget. Have a portion of your funds automatically deposited into retirement/ savings/ investing accounts. Saving does not have to be a burden. Seek to make it as simple as possible.
5. Realize the Duration of Your Earning Potential: The average NFL player only lasts for three years. The average NBA player lasts for seven years. The average entertainer may last for an average of two years more or less depending on the genre and audience. Therefore, an artist’s big paycheck off their hit single may in fact be the first and only one that they ever receive. Attempt to create multiple revenues of income (i.e. public speaking gigs, fashion line, real estate, restaurant, etc.) so that you are not at the mercy of your short-lived career.
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