The “stay at home” financial work out for the professional athlete
INSIGHT ARTICLE |
Athletes face complicated and difficult family and financial issues while “stuck” at home. All major sports have been put on hold, and leagues are determining when and how interrupted and upcoming seasons may return. The athletes’ normal routines have been disrupted–with facilities closed, they have not been able to practice, go to the gym, or even commiserate with their teammates. As a result, “sheltering in place” provides the athlete with rare idle time. Naturally, there are high levels of angst and uncertainty not only about when the athlete will return to play but also what effects the non-playing will have on compensation–both through team salaries and endorsement deals.
To address these concerns, we have created the stay at home workout for athletes to achieve financial fitness.
Here is the work out, based on recommended frequency:
- Fixed vs. Discretionary spending – what is in your control?
- Practice saying, Just Say NO, I will not spend on any unnecessary discretionary purchases.
- Consider limiting credit card use.
2. Cash flow:
- Have you adjusted your monthly budget based on your current income stream, with allowances for potential salary/endorsement income disruption?
- Assuming your projected income may be impacted, what are you doing now to create/increase savings?
- If you have endorsement deals, have you communicated with the companies to determine whether your future payments may be impacted due to interrupted or delayed seasons?
- Court ordered support: if your income changes, can you renegotiate the terms of your support payments?
- Do you have family that you financially support either through gifting or employment? Have you reviewed their support amounts and can your cash flow still support these amounts?
- If you employ family, do you have employment agreements and proper job descriptions?
- Re-think your generosity to your family members, and consider reducing or suspending gifts.
4. Social media/technology:
- Do you have a monitoring service to control hacker posts?
- What is your cyber risk exposure?
- Are you careful in what you are posting on social media?
- Have you deleted unused apps and accounts no longer being used?
- Do you have the latest anti-virus software?
- Do you use a password manager to protect and store all your passwords?
- What are the investment opportunities right now (i.e., real estate, specific industries and/or companies)?
- For your current portfolio, does it make sense to harvest some losses?
- Do not dwell on the current balance, but rather hang in there for the long haul.
- Schedule a conference call with your investment advisor once a quarter for total portfolio review, and ask questions so you understand your portfolio.
- Are your needs adequately covered for your stage in life? Do you have disability insurance?
- Schedule a conference call with your insurance agent to review all coverages.
- For property and casualty, review your list of scheduled assets – are the correct vehicles listed? Is all of your jewelry and artwork listed?
- Consider increasing deductibles to save on premiums.
- Do you have appropriate life insurance? Is there a better product or better terms available to you?
7. Saving for retirement:
- Do you have a savings plan? Can you commit to sweeping a certain percentage of your monthly net income to a savings account?
- Do you maximize your 401(k)?
- As discussed below, considering opening a SEP account for endorsement income.
- Did your financial planner or investment advisor provide you with a long term retirement plan?
8. Taxes – short v. long term:
- 2019 taxes are due July 15. Do you have an estimate of what you will owe for 2019, and do you have this amount set aside?
- 2020 estimated payments for Q1 and Q2 are also due July 15. Has your CPA prepared a projection so that you are properly scheduled for federal and state estimated payments?
- Do you have self-employment income or wages from an S corporation? Review whether it makes sense to contribute to a SEP, and understand how much this can save you in taxes.
- Do you understand the state income tax implications of your taxes and where you must file based on duty days?
- Do you understand the international tax implications of your taxes from overseas games or appearances?
- Did your CPA provide you a list of possible tax saving opportunities?
- Schedule a conference call with your CPA to discuss the above and more, so you are in control of your taxes.
9. Credit monitoring:
- Have you reviewed your credit reports recently? Are there any surprising negative reports?
- Have you been denied credit or offered credit at higher rates due to low credit scores? Contract with a credit agency to improve your score.
- Close accounts you no longer need.
10. Document management:
- What ensures your sensitive and confidential documents are stored properly and easily accessible, if something should happen to you?
- Shred any unnecessary documents, broker statements, etc.
- Keep tax returns indefinitely; keep original tax documents at least 4 years.
- Keep deeds, titles to cars, etc. permanently while you own the asset.
11. Estate Planning:
- Do you have an estate plan? Do you understand the “basic 4” documents of a revocable trust, will, health directive, and power of attorney?
- Have your circumstances changed such that you should update your estate plan (marriage, divorce, additional children, updating assets in a revocable trust)?
- Are the “right” trustees and executors in place, and are they informed and understand your wishes?
- Have you reviewed your beneficiaries of insurance policies, employee benefit plans and your estate plan?
- Have you discussed your legacy with your family and advisors, so that your goals can be achieved?
- Schedule an annual meeting with an estate tax attorney to review your documents.
12. Use of advisors:
- Some leagues offer independent audits of an athlete’s financial advisors.
- Do you have clear written terms of engagement for each advisor, and do you know how they charge for their services?
- Are your advisors all coordinated and working together as a team to meet your goals?
Perform and repeat the above financial workout to become and remain financially fit, and remember to continue practicing when your season resumes!