An athlete-client should set up a written plan with a financial advisor. The counselor should be objective and offer personalized recommendations. Another critical factor is diversification. Finally, your adviser should have a track record of success.
Tax planning
Athletes have many unique tax planning issues. These can include income earned in multiple jurisdictions and the Pease Amendment, which limits itemized deductions. Nevertheless, proper planning can minimize potential tax burdens.
First, consider the geographical location of the athlete’s home base. While every athlete incurs federal tax liability on their earnings, athletes are also exposed to state and local taxes depending on their home or road schedule. For example, a player may be taxed in 28 states in the NBA and MLB. In the NHL, athletes face tax obligations in 23 US jurisdictions and five Canadian provinces. This complicates tax planning for athletes.
In addition to determining residency and filing status, athletes should consider whether the tax laws in their state apply. Then, the financial advisor professional athletes should evaluate whether to file for taxes in Canada or the U.S. if they plan on working in that country. Once these factors are determined, an athlete should choose a tax agent who has experience working with CPAs. After selecting a tax agent, the athlete should discuss the specific tax implications with their agent.
Asset management
If you’re an athlete, you may wonder how to invest in your financial future. Many athletes use visualization to ease their nervousness before a game or competition. The same concept can be applied to investing. Visualizing the success of your portfolio can help you stay disciplined over time, which is especially helpful in the investment arena, where markets have suffered severe setbacks in the past. Luckily, several companies specialize in asset management for athletes.
One benefit of specialized wealth planning for athletes is that they have shorter earning careers than many professionals. As a result, athletes’ career arcs are more concise than the average person’s, meaning they can take more investment risks earlier. They can also ride market cycles to get higher returns. Moreover, they can benefit from financial advice and education to ensure a smooth transition after retirement. The goal of asset management for athletes is to provide guidance and tools that will help them build their wealth over time.
Retirement planning
Athletes who are retiring from professional sports should seek out the help of a financial advisor. With the proper planning, athletes can enjoy their lifestyle for years. Most athletes should have saved enough capital throughout their careers to live comfortably. A financial advisor can guide athletes in managing their money so they don’t go bankrupt. T
Before choosing a financial advisor, one must understand the limitations of professional sports and how to plan for them. Athletes should choose the most suitable investment options, considering their long-term goals. An investment advisor can guide athletes on what to invest in and how to maximize the returns on their capital. Athletes should have enough money saved to live off of the cash flow generated from their capital.
Creating a reasonable budget
Professional athletes make excellent money. However, to maintain a stable financial future, it’s essential to create a budget and adhere to it. Creating a budget before incurring any new financial obligations is a good idea. This way, you’ll know where to start and what to buy before you hit the spending limit.
Map out all sources of income. Athletes may receive irregular income from several sources. For example, they might receive a regular salary from their club or prize money, sponsorship, government grants, or scholarships. In either case, it’s a good idea to list all the different sources of income and estimate the amount of each. This way, the budget will not be so tight that athletes can’t afford to participate in their chosen sport.