Pro Athlete Losses Part 3 (updated 4/2014)

In 2013, I wrote two posts on professional athletes handling their money poorly. Thanks to Nerdwallet.com, where I have begun writing on their Ask an Advisor platform (I am not compensated for this), there is finally a good story to read. Nerdwallet interviewed Eric Sogard of the Oakland A’s.  Eric and his wife work with a CFP(R) financial planner. Since joint the MLB, their big splurge on his $510,000 annual contract was a beagle for $1700, purchased at the mall. Plus a house. (not from the mall, I presume)

Eric’s salary is $10,000 over the MLB minimum for 2014, as he is not yet eligible for salary arbitration. In 2013, the average salary was $3,386,212. For those who do not know, players are eligible for salary arbitration after year 3 and before year 6 in the League.

 

Here is the piece fromNerdwallet.  Written by Cliff Goldstein on April 2, 2014

“The face of major league baseball wears glasses? That was very nearly the case when, over the winter, the Oakland A’s bespectacled second baseman Eric Sogard finished second in an online fan poll for the #FaceofMLB—besting the likes of former league MVP Buster Posey. Not bad for a guy who broke into a regular starting role just last year.

Eric caught our attention at NerdWallet for two reasons: his wearing glasses gave rise to the nickname “Nerd Power,” and it turns out he’s a great example of a professional athlete who’s financially responsible. On the eve of the 2014 season, we chatted with Eric and his financial planner, Brett Dimas from OFS Wealth, about the lessons he’s learned about money, some of the first big purchases he made (including one pricey pup), and how he’s working today to set his family up for the future. “

 

NerdWallet: When you were a kid, how did your mom and dad first teach you about money? Do you remember your first money lesson growing up? Read more 

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Pro Athlete Financial Losses (and how you can do better)

Financial losses by professional athletes are in today’s news a couple of times a year, it seems. It’s both sad and frustrating to read about pitcher Curt Schilling and quarterback Mark Brunell, two former professional sports stars in the media for losing much of their sports-related earnings. Schilling, (a video game entrepreneur-38 Studios), told a Boston radio station recently that he may have “lost all the money he saved from playing baseball.” Brunell lost millions in commercial real estate and a “Whataburger”.

A Whataburger restaurant. (Photo credit: Wikipedia)

When one can lose $50,000,000 to $75,000,000 before age 50, that’s an extraordinary achievement. Most of us won’t make that much in a lifetime, even if we count the entire family. To put $50,000,000 in perspective, if you lived to age 82, it would mean that you had $1670 to spend every day of your life.

Mark Brunell (Photo credit: mlgkhc)

In reading the Seattle Weekly article about Mark Brunell, I learned of Ken Ruettgers, a former Green Bay Packer and his business of counseling players after the NFL.

On his finances page, Ruettgers has 5 “Reality Checks”, one of which is “get help”. Another one is “downsize.”

Those are useful reminders, rules and habits. However, the rule that these athletes both ignored was to pay yourself first. That bears repeating.

Pay yourself first.

When you get your first job, pay yourself right away, before you pay the bills. Your future is the most important bill. Don’t wait until the end of the month. If you can go through your entire working life living on 90% of what you earn, you have given yourself a terrific boost. This is ten percent of your take-home pay, mind you – in addition to any other employer contributed funds, pension benefits (ha) , bonuses etc.

Ten percent of Curt Schilling’s lifetime earnings in baseball is $11.4 million. At the conventional “safe withdrawal rate” of 4%-that is $38,000 income per month (before taxes).

Even if you don’t have the millions of a Schilling or a Brunell, you can follow the rule above.. If you can’t begin with ten percent contributions to savings, pick a lower number and promise yourself that you will increase it regularly. this is how you will do better than the millionaires. Remember:

• Pay yourself first
• Downsize
• Get help

(I’m sure that each of these athletes saved money along the way, but apparently those funds were not set aside in a way that would ensure their families’ financial security even if other business efforts failed.)

Related articles

• Curt Schilling And Why Athletes Make Such Poor Financial Decisions (forbes.com)
• Money Lessons from an ‘Ultimate Fighting Champ’

From the article above: “Financial advisers generally recommend allocating the lion’s share of your wealth to traditional asset classes such as stocks and bonds, and devoting only a small portion to real estate and alternative investments such as private equity. Yet athletes often do the reverse.”