Athletic skill and financial acumen don’t always come in the same package, which is why many successful pro athletes run out of money once their fat paychecks stop rolling in.
Last month, The New York Times took a look at sports stars who squandered their millions and wound up in financial trouble. Bad luck, ill-advised investments and poor money management are usually at the core of these riches-to-rags tales. Here are the lessons the reporter gleaned from the athletes:
*Take it slow. If you come in to more money than you’re used to, there’s no need to make hasty decisions, such as investments or major purchases, that spread you thin. It’s rare that you’ll find a major financial move that won’t work out better without a few extra days, weeks or months of forethought.
*Be careful about where you get your advice. If you have a large sum of cash at your disposal, people will come at you from all sides with suggestions about what you should do with it. Every potential adviser — even a standard money manager you’ll find at a brokerage — has their own agendas and prejudices. If you allow others to do your financial thinking for you, it’s tougher to keep track of your financial big picture.
*Think small. It’s tempting to use all the resources at your disposal to immediately fulfill the dreams for you or your family, but it’s far more important to take care of the basics before spending big. Establishing precedents of extreme indulgence and generosity makes it tough to stop continuing the patterns.
Financial Lessons From Sports Stars’ Mistakes [The New York Times]