Social Media-Born Millionaires and Pro Athletes — What is the Price to Pay for Poor Financial Knowledge? Tips and Tricks from your Agent
May 5, 2021
Over the past decade, with the changing landscape of content consumption following the expansion of social media, celebrities are taking all sorts of new shapes and forms. From Kylie Jenner becoming the youngest self-made billionaire at age 21 to 15 year old TikTok stars making a full salary before even graduating high school, this new reality comes with a learning curve that can end up being quite expensive for many: planning their finances.
Same goes for athletes, for example, which are now not only dealing with a sports fan base on the field, but one on their screens too - surpassing what being an athlete used to be about and making a living off of being influencers too. The public is craving human connection, relatableness, and unique personalities over almost anything else right now, thus creating in its track a whole new category of celebrities - and millionaires.
Becoming rich overnight is not something that is new for athletes, most of which have a full career ending after less than a decade, but with this phenomenon occurring more frequently than ever before, Dulcedo’s very own Chris Lambiris, Pro Player Sports Agent and Financial Advisor, had to ask: “Is this new generation of overnight celebrities ready to properly plan out their finances in accordance with their new lifestyles and life goals?”
He shares some interesting facts and anecdotes about working on financial plans for athletes throughout his career, as well as critical tips and tricks for these overnight celebrities and financial successes. Buckle up, valuable insight is coming your way and you won’t want to miss it.
Learning from athletes’ History of financial mistakes
Watching our favourite athletes on the screen and seeing them pose with a new sportscar on Instagram can look like one thing on the outside, but behind closed doors is often a different story. According to Sports Illustrated, 78% of NFL players who are retired for only two years file for bankruptcy, and after five years of retirement, 60% of NBA players suffer the same fate. We are talking here about millionaires. So how does it happen? The truth is most athletes lack the financial knowledge to manage the large sums of money they're earning. Allen Iverson, former professional player in the NBA, is one of the many athletes who lived a lifestyle based on his peak earnings, yet failed to think about the money he would need later in life (source at bottom of page). Because ultimately, just like sometimes ephemeral influencers and celebrities, most pro athletes have very short professional careers, meaning only a few years of active earnings. This gives many a false impression of financial stability when soon those earnings will disappear, and if they don’t have a financial plan to back them up, retiring at 30 can be very costly in the long run. Especially when one is used to living lavish.
So what tips does a professional like Chris Lambiris have for these cases, or even for people in general? It’s much simpler than you might think.
Creating sound spending habits
First, we want to break this myth that financial advisors don’t want you to spend anything, live conservatively, and refrain from enjoying your earnings as you deserve. It’s about planning and budgeting. No one said you can’t budget for an expensive car or a family trip in the tropics, just make sure you plan for it and that those plans fit in with your other objectives. The key is in educating yourself and creating habits that both allow you to reward yourself and achieve your future life plans. They don’t need to be mutually exclusive.
A good place to start is always establishing long term, midterm, and short term goals. Sounds obvious, but you would be surprised how many of Chris Lambiris’s stories involve professional basketball players returning to their financial advisors asking to cover their 50K weekend of partying. An advisor won’t tell you not to enjoy your time-off, but taking out retirement earnings that could have grown overtime for two days and not many memories is only hurting your own dreams. The best thing to do is start with the long-term plans and slowly make your way to short term. Once your goals are established, there’s nothing wrong with seeing what disposable income you have left to spend now, because enjoying your earnings is important too.
If you’re an athlete, think of it as a sport: you would never show up to a game without a plan. You know there is a whole process behind a successful performance: from nutrition, to training, to mental health. In reality, your financial advisor is much like a coach.
And that brings us to the next question: How do you pick the right financial advisor, or “money coach”?
How to pick the right financial advisor?
The way you choose those sports experts around you is roughly the same as choosing an accountant or financial advisor. You don’t need to be an expert yourself, you just need to find someone who understands you: your priorities, your values, your objectives, and your guilty pleasures. This is the key to planning out a clear order of priorities to help you balance long-term plans and short-term treat-yourself moments.
Also, experience is key in establishing what the strengths and weaknesses are of your potential advisor. What education do they have - what credentials? Do they have a CPA (Certified Public Accountant) or a CFA (Chartered Financial Analyst)? And similarly, look at what your own particularities are. What is it you need most and at this point in your life? Are you looking for help in creating habits or someone to manage your investments? How do you feel about risk? These are all questions that you need to answer during the process of picking the right assistance.
In reality, it’s just like picking an agent.
If you need someone who can manage your investments, you need someone who understands your financial behaviour - who understands you. Your profile may be different because of your age and the nature of your earnings - if you are younger and making big earnings from, say, sporting competitions, you won’t have the same security than someone older who has a lower income, but with much more stability. Age and behaviour are tightly knit, especially when it comes to spending behaviours. If your source of income is unstable, that can give you a false sense of security. It’s important to make that distinction early on.
You may also be earning your money from different sources, which can also be a great path for budgeting. A great example of this is Marshawn Lynch, who lived pretty much his entire career off of endorsements exclusively, keeping all professional athlete contract earnings for retirement - and a very nice retirement at that.
So make sure you find an advisor that fits with you: that is available, that understands you, and most importantly that you trust.