Budgeting for the Entourage
When an athlete finally makes all of the blood, sweat and tears of years of amateur competition pay off in the form of a professional contract, it is only natural that he or she might want to take care of family and close friends who had helped the athlete along their journey. The new pro athlete has to keep this type of expenditure under control.
Not helping friends and family at all might be unacceptable, but sticking to a set budget is critical to maintaining long term financial health. I counsel my clients to cap this spending at 10% of annual income. While this might leave some friends wanting more, having this distinctly expressed in the athlete’s financial plan serves not only as a reminder to have fiscal restraint but also as an easily explained excuse when faced with telling someone who wants money “no”.
In addition to extended family and friends that gravitate towards the athlete simply to live off the gravy train, there will also be those acquaintances eager to pitch business ideas to the athlete in hopes of garnering a wealthy backer. It is important to understand the difference between investing and speculating. While both involve the risk of losing money, investing is the disciplined allocation of funds in established investment vehicles while speculating is allocating funds into very risky, non-traditional options, such as starting a business or collecting art. Due to the risky and illiquid nature of starting a business, the athlete should only invest an amount that they are willing to lose.
With a little planning and discipline, an athlete can take care of friends
Posted by Scott Bombeck is a Certified Financial Planner and President of Acanthus Associates. www.acanthusassocaites.com Securities offered through Cambridge Investment Research, Inc. a Broker/Dealer, Member FINRA/SIPC