When Joshua LeBlanc got his signing bonus from the Los Angeles Angels in 2004, the first thing he did was drive to the mall. Over the next few hours, he spent so much on new shoes and clothes that, for the first time, he hit his bank’s daily debit card limit. “That could have been an education. But the next day, I was back at the mall,” he remembers. “I felt like I had to dress a certain way now. It was easy to fall into those traps.”
He learned his lesson, though, and now LeBlanc, who became a financial advisor after leaving baseball in 2008, helps pro ballers (and non-athletes, too) avoid the same pitfalls and focus instead on strategies to turn their earnings into nest eggs.
Pro baller paychecks may be bigger than yours, but the same principles apply whether you’re earning $50,000 or $5 million a year. If you want to set yourself on the path to financial success—and even early retirement—take a cue from the lessons the savviest athletes have learned.
1. Have a game plan going in. “In baseball, if you go in without a game plan, your success rate isn’t high,” says LeBlanc. “It’s just as important to have a plan in place for your money.” Jonathan Miller, a C.P.A. and president of theSports Financial Advisors Association who works with several pro athletes, says he tries to sit down with clients early on.“We talk about how much money they want to have in hand when they retire and then work backwards.” A good rule of thumb for anyone: Aim to put at least 10 percent of each paycheck toward your post-work life, starting with contributions to a 401(k), IRA or other tax-advantaged account, and make sure to take advantage of employer matches. (Want to retire early? Sock away more.)
2. Save enough to cover pay gaps (or unexpected bills). Many athletes only get paid for part of the year, Miller says, “So you have to be disciplined and set aside money for when you don’t get a paycheck.” The same approach can apply to those with contract jobs (nearly 54 million people in 2015) or shaky full-time positions. And regardless of your situation, it’s smart to work toward having three to six months worth of expenses saved to cover unexpected bills or layoffs.
3. Pay yourself first—and don’t sweat the small stuff.Once you’ve figured out how much you need to save and invest from each check, set up automatic transfers to your saving and investment accounts from your checking account to coincide with your paychecks. Automating helps you avoid overspending and takes the stress off tracking every cent. It’s not about the “nitty gritty of small purchases,” says Miller. “It’s really about how much to save from each paycheck so you hit your goal at the end.”
4. It’s okay to splurge, sometimes. A newly signed athlete may buy a new car. A newly hired lawyer may buy an expensive suit. “Until you build up confidence, that may be something that lets you feel comfortable walking into the courtroom,” says Miller. “The question is: How do you do that without blowing your budget?” Sometimes the answer is to spend a little more from the first couple paychecks, but then set aside more savings from the checks that follow. The key is making sure it doesn’t become a habit, says LeBlanc. “Overextend yourself and you’ll always be chasing the buck. You’ll always be trying to catch up.”
5. Leverage your skills (and brand) to create new sources of income. Even well-paid athletes pick up side hustles. A.J. Francis signed a one-year deal with the Tampa Bay Buccaneers worth $600,000, but told reporters he’s been moonlighting as an Uber driver—earning a little extra income and interviewing passengers in the hopes of using that experience, plus his pro football credentials, to launch a second career in broadcasting. And, of course, endorsements can provide steady income for athletes long after they leave the field or court: LeBron James famously signed a lifetime deal with Nike NKE -1.03% said to be worth as much as $1 billion. You likely won’t find a gig quite that lucrative, but it’s easier than ever to leverage your skills, build your brand andboost your income, thanks to social media and online marketplaces like Fiverr, Gigbucks and Etsy.
6. Avoid freeloaders and enroll friends in your goals.“When you start making money, you can get used to always picking up the check,” says Kansas City Chiefs Hall-of-Famer Nick Lowery, who played in the NFL for 18 years and and now consults for Viktre, a private social network for athletes. “It’s easy to get caught up in the culture of the entourage.” The same can hold true if you’re earning more than your friends. It’s not just about saying “no” to requests to cover checks when you start making money, though. It’s finding a “no” friend who has your back “and will talk you out of doing something dumb with your money, too,” says Miller.
7. Don’t lose focus. “That was something I learned when I was playing,” says LeBlanc. “You need to keep your focus on the field.” The same holds true with your financial goals. Lose track of your goals, and you can be easily distracted and fall off track. LeBlanc says he constantly reminds clients of the consequences if they do overspend now—whether it means postponing retirement or buying that home. “You have to ask yourself: What’s more important to me?” he says. His advice: Stick to the plan and keep your eyes on the prize.
Source: Forbes.com author Jennifer Barrett
Financially savvy athletes know how to live below their means and invest in their personal brand. The same goes for average Americans, too.
Professional athletes earn huge sums of money at a young age, but their sports careers are often short-lived due to injuries, underperformance or other factors. Many wind up destitute later in life, not unlike lottery winners with a sudden influx of cash and little experience managing money. An infamous 2009 Sports Illustrated story reported that more than three-quarters of former NFL players were bankrupt or financially strapped within two years of retirement and 60 percent of former NBA players went broke within five years of retirement.
But not all pro athletes fall prey to unscrupulous managers, greedy friends, flashy cars or other pitfalls. Evan Waxman, a director in accounting firm EisnerAmper’s Athletes and Entertainment Group, sees some of his clients now bucking the stereotype of the high-rolling, big-spending professional athlete. “These guys are not spending money frivolously,” he says. “They’ll say, ‘Should I maybe not get two cars?’ They’re not spending the money in a haphazard manner that you would expect them to,” he adds.
Alan Spector, a retirement planning consultant and co-author of “Your Retirement Quest,” is working on a book about how elite athletes can navigate the emotional side of retirement. He says smart athletes use strategies they’ve learned on the field to transition into a new life stage. “Elite athletes have developed skills and experience that have made them successful in their profession, and they’re the exact same skills that you need to be successful in retirement,” he says. “Understanding the game you’re gonna be playing, assessing strengths and weaknesses, recognizing circumstances as they change and adjusting your game plan … that’s the same thing an athlete does at a game.”
In fact, while many pro athletes get paid larger amounts of money earlier in life than the average American (and they may retire from the field by age 30), the big-picture strategies needed to successfully plan for and transition into retirement apply to all workers. Here’s a look at those smart retirement moves.
Live below your means. Regardless of your annual income, spending more than you make is bound to get you into financial trouble. Even with a huge signing bonus and a cushy salary, a player’s circumstances can change quickly. “With new player contracts, some of the money is not guaranteed,” Waxman says. “They can go from someone being under contract to being dropped because of an off-field situation,” he adds. Anyone who has been fired or laid off unexpectedly understands this predicament. As Spector points out, “financial security is not about the size of the nest egg, it’s about managing within your means. That’s true for the elite athlete as well as everybody else,” he says.
Know what you’re spending. In addition to staying below your means, you need to have a budget and know where your money is going. Some athletes like to help out family members, and Jeff Dunn, executive vice president and head of the Sports and Entertainment Group at SunTrust Bank, says that’s fine as long as the athlete builds that into his or her budget. “They need a true budget so they understand on a monthly basis where they’re spending their money and how they’re spending their money,” he says. Some savvy athletes manage their money by living off of endorsement deals and saving their salaries. “Unfortunately, those tend to be the exceptions rather than a rule,” Dunn says.
Build your personal brand. Big-name athletes can leverage their fame to secure endorsement deals or transition into motivational speaking or broadcasting once they retire. “Some people are very lucky and have endorsement deals or have careers where they have become household names and can utilize that to keep earning income,” says Jonathan Miller, president and co-founder of the Sports Financial Advisors Association. However, legal troubles or public missteps can damage an athlete’s personal brand (similar to how posting inappropriate photos on social media could jeopardize the average person’s career), so staying clear of controversy can help, but it may not guarantee continued earning power.
Athletes who are lower profile or who want a less public retirement can look at other options for asecond career. “We have some athletes that are interested in our business on the financial side,” Dunn says. “We try to help them understand what we do and how it impacts people’s lives.” In most cases, that second career will not replace the income pro athletes earned previously, so saving money early on and avoiding lifestyle inflation can help.
Prepare emotionally for the transition. While some Americans retire involuntarily following health problems or a layoff, most people choose when to retire and have time to emotionally prepare over the course of their career. But many pro athletes don’t have this luxury because they could be abruptly sidelined by an injury or become a free agent and simply not get picked up for the next season. “The difference with an [elite] athlete is you’re 30, and you’ve got 30 years to figure out,” Miller says. For many pro athletes, their professional success is a huge part of their personal identity, so losing that identity and losing touch with teammates who are still playing can be an emotional minefield.
Miller says it can take about three years for professional athletes to transition into their next act. “Initially there’s a lot of [pondering] ‘What do I do?'” Miller says. “They’re used to a routine: waking up, going to practice. They might be sitting around the house with nothing to do. A big part of retirement has to do with the psychological.” More traditional retirees can also struggle with the loss of their routine and their professional identity, so carefully planning how you’ll spend your time and how you’ll maintain social contact with others should be part of your retirement plan to ensure a smooth transition.
Source: USNews.com author Susan Johnston Taylor
Rob Gronkowski is known as perhaps the NFL’s biggest party boy, but that hasn’t prevented the New England Patriots star from being smart with his money.
Although the All-Pro tight end has been involved in his fair share of controversies—from taking risqué pictures with a porn star to reportedly being offered a role in a porn movie himself to taking his party persona to the club—his carefree attitude hasn’t hurt his wallet.
Gronkowski reveals in his new book “It’s Good to Be Gronk” (h/t ESPN)that he has saved literally all of the money, $10 million-plus, that he’s made during his five-year tenure as a member of the Patriots. An excerpt from his book reads:
“To this day, I still haven’t touched one dime of my signing bonus or NFL contract money. I live off my marketing money and haven’t blown it on any big-money expensive cars, expensive jewelry or tattoos and still wear my favorite pair of jeans from high school… I don’t hurt anyone.”
Throughout much of his career, Gronkowski’s wild celebrations, beer-guzzling ways and the overall social buzz surrounding his off-the-field life have earned him a reputation as just another major NFL star who prioritizes having fun over making an impact on the gridiron. But beyond Gronkowski’s jawdropping numbers proving those doubters wrong about his focus on football, his frugal spending habits show that he’s more than simply a great football player who likes to party.
He’s a great money manager, too, and his philosophy of “big pockets and short fingers” should serve as a lesson for the countless NFL stars who believe that “spend now and worry about it later” is the right way to live.
States began levying income taxes aimed specifically at professional athletes as early as the nineteen-sixties, but it wasn’t until 1991 that these so-called “jock taxes” began to be enforced with vigor. That year, when the Los Angeles Lakers lost the N.B.A. finals to the Chicago Bulls, California moved to collect tax against the income Michael Jordan and his teammates earned while playing in the state. Infuriated Illinois lawmakers in turn passed their own tax laws that specifically targeted visiting athletes, including the Lakers. The Illinois countermove became known as “Michael Jordan’s revenge.”
Since then, more than a dozen states, including Arizona, Colorado, Indiana, Louisiana, Maryland, Massachusetts, Ohio, and Pennsylvania, have enacted regulations to collect taxes from athletes who earn income there as part of their competitive schedule. Some municipalities, including Cleveland, Cincinnati, Kansas City, Pittsburgh and St. Louis, have added them, as well.
While some say that the taxes are a small price for a handful of wealthy athletes to pay, others have criticized the motives behind them. Often the funds go into general state coffers, but in a handful of states, such as Tennessee, jock-tax revenue may support the venues where athletes play. Lawmakers and arena owners sometimes tout jock taxes as a way to publicly finance a new arena without passing the cost to constituents. In January, for example, Wisconsin Governor Scott Walker announced a proposal to impose a tax on N.B.A. players to cover debt payments on two hundred and twenty million dollars for such a project. It’s led to some cries of taxation without (local) representation.
“It’s going to be hard to find a lawmaker that has sympathy for a few thousand or so people who make a lot of money and don’t carry votes,” Jonathan Nehring, a tax lawyer and blogger who writes about sports-related taxes at TaxaBall.com, said.
When athletes want their interests represented, they turn to people like Mark Goldstick, a certified public accountant based in Chicago. Goldstick was working as an accountant, mostly with high-net-worth clients, when, in 1985, one of his fraternity brothers from college started a sports agency, Priority Sports and Entertainment. The company began to include tax services as part of its offerings and, in 1998, Goldstick’s friend gave him eight athletes’ tax returns. Within three years, that number had grown to sixty. Goldstick, who is now the C.F.O. of Priority, estimates that this spring he will complete thirty-four tax returns for past or present N.F.L. players, twenty-seven for N.B.A. athletes, and thirteen for professional basketball players overseas, among others.
Goldstick’s goal, he says, is to keep his clients’ names on the sports page and off the front page. He has reams of paperwork, organized by state, in order to stay current on the tangle of local laws concerning athletes’ incomes. Increasingly, Goldstick finds himself involved in conversations with players over the tax consequences of being a free agent or the nuances of a particular trade. (He is quick to extoll the income-tax-free virtues of being on the roster of the Jacksonville Jaguars.) And if players go overseas, there are also foreign tax treaties to keep track of.
The tax code is not immune to athletes’ competitive drive. One of Goldstick’s clients, the offensive tackle Tony Pashos, recounted comparing notes with other players in the locker room: “You’d hear stories about ‘my accountant let me write this off or that off,’ ” he said. “I’d go tell Mark and he’d say you could push it, but why risk it?”
Pashos does not write off the suits he wears on planes to games, for example, nor would he deduct more than a modest portion of the cost of a home theatre, even if he uses it to watch game film. Costs associated with off-season training, such as hotels and yoga or Pilates classes, are generally kosher; luxury cars are not. Goldstick says he has successfully argued that up to forty per cent of the cost of client’s hot tub was permissible as a deduction, and he was able to deduct the cost of hyperbaric chambers for two clients, since they were used to help endurance and healing ability. Goldstick has also successfully argued that the fines his clients pay to leagues as penalties for their behavior on and off the field are tax deductible as an ordinary business expense.
Thanks to their high profiles and their large incomes earned across multiple states, athletes are popular targets for tax officials, Goldstick told me. Some larger states, like California, have employees in their revenue departments who are entirely devoted to parsing athletes’ tax returns. (A spokesperson for California said that there used to be an employee who handled all the tax returns for athletes visiting from out of state, but now the out-of-state returns are spread among officials.)
Kevin Mawae, a retired center who played for the New York Jets, is a client of Goldstick’s. During his 2000 season, Mawae and his wife, Tracy, who was pregnant with their second child, decided to make Louisiana their home state, to be closer to family. Mawae travelled to New York to play for his team, which is technically located in New Jersey. During the season, he earned roughly five millions dollars in nearly a dozen different states. Then came New York State tax officials came to audit him, and Mawae soon found himself in a maze of airline tickets, American Express statements, gas-station receipts, and other paperwork to prove that he had met the requirements for having lived in Louisiana and hadn’t passed the hundred-and-eighty-three-day minimum for being a New York resident. “I couldn’t imagine walking in to an H. & R. Block or a Walmart and just asking someone there to do my taxes,” Mawae said.
Jock taxes have grown only more complicated since “Michael Jordan’s revenge.” Lately, tax experts have had their eyes on two cases in Ohio. In January, the state’s Supreme Court heard arguments over whether the city of Cleveland had unconstitutionally charged municipal income tax to two former N.F.L. players. In the pair of lawsuits filed by the former Chicago Bears linebacker Hunter Hillenmeyer and the former Indianapolis Colts center Jeff Saturday, the athletes claimed that they were wrongfully charged a two-per-cent income tax for games they played at Browns Stadium. (Under standard Ohio law, local governments cannot charge visiting workers municipal income tax unless they are there for more than twelve days in a year.) Saturday didn’t even play in the game in question, because of an injury. Lawyers and accountants say that the Ohio cases, which are still awaiting verdicts, may provide a model for how other states and municipalities tax professional athletes in the future.
As for Goldstick, he said that while many of his 2014 returns are completed, he’ll be filing extensions on behalf of most of his clients. “It’s going to be a long season.”
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Round One of the NFL Draft takes places this Thursday at the Auditorium Theatre. We’ve already heard what’s ahead for commuters trying to get around the Loop. But the Draft is really about the players and how a selection will change their future. Along with the chance to play in the big leagues comes fame, sometimes endorsement deals and an influx of cash. And while the average NFL salary is $2 million a season, professional sports isn’t like any other career-it’s short-and for many of those players that money dries up quick. And there are a number of reasons for that.
Jerry Azumah played with the Chicago Bears for seven seasons before retiring to focus on philanthropy and other business ventures. He’s with us now to talk about what life was like post NFL. And Jonathan Miller is President and Co-founder of Sports Financial Advisors Association and here’s here to offer tips on how athletes can keep their financial houses in order.
The truck that Chevrolet presented to New England Patriots quarterback Tom Brady as Super Bowl MVP will be given directly by the company to teammate Malcolm Butler instead.
Mark J. Rebilas/USA TODAY SportsMalcolm Butler’s Super Bowl-winning interception also netted him the truck Tom Brady won for being named the game’s MVP.
Chevy spokesman Michael Albano said the truck, a loaded Colorado, will be given to the cornerback, who intercepted Russell Wilson‘s pass on the goal line to seal the Patriots’ win in Super Bowl XLIX last Sunday. The event will take place in the Boston area Tuesday, Albano said.
If Brady received the truck himself and gave it to Butler, he would have to count its value — which Albano said was worth roughly $35,000 — as income and he would be taxed on it, said Robert Raiola, a CPA who specializes in sports tax management with O’Connor Davies in New Jersey. Brady also might have had to pay a gift tax. U.S. residents can give $5,430,000 worth of gifts in their lifetime before having to pay tax on what they give. It is not known how close Brady might be to that limit.
Now instead of Brady paying income taxes, Butler will have to, according to Raiola. The approximately $35,000 value will now count as income to Butler, and he will pay taxes on that.
Butler, a rookie, made $585,000 this past season, including a minimum of $420,000 and a $165,000 bonus that all Patriots players got for the postseason.
Brady has made more than $150 million in his career.
Brady told Boston radio station WEEI on Tuesday that he would love to give the truck to Butler, and the idea was launched.
Brady has given a vehicle away before. He donated the car he won as Super Bowl XXXVIII MVP to his high school, which then raised $365,000 from a raffle associated with it.