Financial Challenges for Professional Athletes

By: Zachary Brody, CFP®, ChFC® & David Tomczyk, PhD.

Managing finances as a professional athlete requires careful consideration and planning. Professional athletes face many financial challenges when it comes to managing their finances. As new athletes enter the professional sports world, they may be faced with unique financial issues that require careful consideration and planning.

One of the biggest challenges that athletes face is a lack of financial literacy. Many athletes have limited, if any, financial education, and they may not fully understand how to manage their finances given their newfound wealth. This lack of knowledge can lead to poor financial decisions that can have long-term consequences, such as overusing credit, not budgeting, investing without proper research, and not having an emergency fund.

Athletes are also at risk of being taken advantage of by friends and family who may see their newfound wealth and personal connection as an opportunity to ask for loans or investments without any intention of paying the athlete back. It is essential for athletes and their agents to be aware of this risk, to have a plan in place, and to practice having the difficult conversations these types of situations require.

Another challenge is the risk of income or job loss. Athletes are often at risk of sustaining injuries during their playing careers, which can lead to a loss of income. Additionally, contracts may not be renewed, which can further result in sponsorship deals being cancelled, leaving athletes without a source of income. It is crucial for athletes and their agents to plan for these possibilities and to have a solid financial plan in place.

Professional athletes often have short careers where they earn a lot of money upfront, but only for a limited time. For example, according to a study by the NFL Players Association, the average length of an NFL player’s career is 3.3 years1, and the Major League Baseball Players Association found that the average length of an MLB player’s career was 5.6 years2. These figures suggest that professional athletes have a relatively short window to earn significant income.

However, it is important for athletes to recognize that this income is finite and that they will need to make it last throughout their retirement. This can be challenging, especially if athletes are not accustomed to managing large sums of money. According to a report by the National Bureau of Economic Research, around 16% of NBA players file for bankruptcy within 12 years of retirement3. The report suggests that poor financial planning and decision-making contribute significantly to these bankruptcy rates.

To avoid these types of financial pitfalls, athletes should consider working with financial advisors who specialize in professional athletes. An experienced advisor can help educate athletes about their finances, develop a budget and savings plan, and create a long-term financial plan. Advisors can also help athletes make informed decisions about investments, taxes, and other financial matters.

Another solution is for athletes to work closely with their agents to create a plan that addresses these unique challenges. Agents can help athletes negotiate contracts that offer financial security in the event of early retirement, an injury, or a contract not being renewed. They can also help athletes identify potential financial risks and develop strategies to mitigate these risks.

While the goal of most professional athletes is to have a long and profitable career, many have a limited time to earn a significant income, which requires careful financial planning and management. It is important for athletes and their agents to be aware of the unique financial challenges that they may face and to have a solid financial plan in place. By working with a qualified financial professional and closely with their agents, athletes can better understand their finances, protect themselves and their families, and build a strong financial future.



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