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A financial plan fit for a pro athlete: the 4 part approach

Many Oklahoma residents have faced financial struggles whether the hardships stemmed from credit card debt, unemployment, student debt or medical bills. Even players in the NBA and NFL, earning six figures or more, struggle with managing finances.

In fact, 78 percent of NFL players face either bankruptcy or other financial hardships within only two years of retirement from the football field. Sixty percent of NBA players battle these adversities within five years of retirement. The financial advisers that assist these players need to have a strategic plan in place in order to help them secure their financial stability. One financial planning firm broke down their athlete assets management process into four parts:

  1. During a player’s first contract, the player usually makes several hundred thousand dollars a year. At this point, many players wish to make extravagant purchases. The advisers recommend making modest purchases and help players to establish a basic budget and financial plan.
  2. Advisers recognize that second contracts bring more money, from $2 million to $5 million per year. The planner may begin to plan for taxes and prenuptial arrangements, as well as college-savings plans for the player’s children. The planner may advise clients to create trusts in order to safeguard their property from creditors.
  3. The third part encompasses the player’s peak earning years, when players typically bring in a salary of $5 million to $7 million a year and additional endorsement profits for around five to 10 years.
  4. The final part of the plan is retirement. The adviser will help the former player to manage his or her pension and retirement-savings accounts.

While this may seem like a plan fit only for a professional athlete who makes millions, there are several important aspects of this plan that can help almost anyone manage their finances effectively.

Make sure to start saving for important things such as retirement, college funds for children, and other necessary expenses early. Even setting aside a small amount each month can help in the long run.

However, if you are facing financial struggles now it may not be possible to implement these plans. You may be facing creditor harassment and overwhelming debt. You may feel hopeless and even ashamed, but there is a light at the end of the tunnel. Debt and financial turmoil can afflict anyone at anytime, including high-income athletes and average working Americans, so there is no shame in facing these problems. If you are struggling to manage debt, it can be wise to consult an experienced debt relief attorney to find the best path for you.

Source: The Wall Street Journal, "The challenges advising pro athletes," Arden Dale, April 14, 2014

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