Successful athletes tend to have certain habits in common. They follow disciplined training schedules. They accept coaching from people they trust. They set ambitious goals and pursue them with a relentless focus.
Athletes who have achieved enduring financial success also tend to share the same habits. By understanding what those habits are, and applying them to your wealth planning process, you can help increase the odds of extending your financial success well beyond your playing years.
One: Begin with the end zone in mind
Creating a successful plan requires a clear set of goals. Think about how you see your life unfolding. What kind of lifestyle do you want to live now? What do you see yourself doing after your playing days are over? What kind of support do you intend to provide to the people and causes that mean the most to you? Financially successful athletes have clear answers to those questions. They also have good advisors who can help them translate those answers into quantifiable financial goals.
Two: Pick the right team
As a pro athlete, you have a unique set of challenges and opportunities that most financial advisors will never see. You don’t want to be the victim of a new advisor’s rookie mistakes. Pick a financial professional who has deep experience working with professional athletes, and make sure that he or she has access to the broad range of resources needed to manage the financial affairs of highly affluent people. You play in the major leagues. Your advisory team should, too.
Three: Think defensively
Athletes who achieve long-term financial success tend to think in terms of risk-management first and wealth accumulation second. Your career has already made you wealthy. Your financial strategy should focus primarily on keeping you that way. That includes being adequately insured against potential liabilities, and maintaining a budget that sets aside sufficient resources for longer-term needs.
Four: Use leverage wisely
Most people borrow because they want something and don’t have the cash to buy it. You are not most people. For ultra-high net worth families and individuals, borrowing is a strategic tool that is used to potentially achieve specific wealth-management objectives. It can help you meet short-term spending needs without disrupting a long-term plan and enhance the potential for returns on investments. Financially successful athletes do not borrow to live beyond their means. They borrow strategically to help achieve their goals.
Five: Give with purpose
Anyone who has achieved financial success in the public eye is constantly solicited for charitable donations. Many of these causes are worthy and quite a few athletes give generously. You may have wondered which charities deserve your support. Financially successful athletes begin with a different question. They ask, “What do I want to accomplish?” A good philanthropic strategy has a lot in common with a good financial strategy – the most effective plans have the clearest goals. Start by defining the change you want to see in the world. Then determine which philanthropic investments have the best prospects of achieving that change.
Six: Secure your legacy
Successful athletes make their earnings last a lifetime. But highly successful athletes think in terms of generations. Successful wealth transfer strategies take advantage of trusts and other financial structures to minimize taxes and maximize the resources that will be available to the people and organizations you support. The best strategies consider how your heirs will develop the skills and values needed to successfully manage their inheritance.
Seven: Wealth is the means, not the end
Many highly affluent people find the challenges of managing their wealth to be very stressful. Financially successful athletes are not immune to these stresses. They do, though, tend to focus more on the progress towards their greater goals in life, and less on the numbers in their account. They see wealth as the fuel that allows them to live the life they want to live, help the people they want to help, and create a lasting legacy that is true to their values.
Athletes with the biggest contracts are not always those who achieve enduring financial success. While it’s helpful to maximize your earnings in your prime, lasting financial success is at least as dependent on your wealth planning discipline as it is on your earnings. By setting clear goals, and developing sound financial habits, you can improve the odds of securing a financially successful future.
W. Drew Hawkins is a Managing Director and Head of Morgan Stanley Global Sports & Entertainment
Morgan Stanley Smith Barney, LLC does not provide tax or legal advice and these materials should not be construed as such. Individuals should consult their tax advisor and/or attorney for matters involving tax and/or legal advice. This material does not provide individually tailored investment advice. It has been prepared without regard to the individual’s financial circumstances and objectives and may not be suitable for all investors.© 2015 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 110492102/15