As if dating supermodel Giselle Bundchen wasn’t enough, NFL player Tom Brady’s $US 31 million pay packet has secured him spot No.13 in Forbes’ 2011 50 Highest-Paid Athletes. The list measures income over a 12-month period from salaries, bonuses, prize money, appearance fees and endorsements.
Brady hails from a sport whose top draft picks last year secured contracts worth $US50 million and $US40 million. Kind of makes Australia’s top-paid footballers, whose contracts earn them around $A1 million a year in the AFL and $A650,000-$A700,000 in the NRL, pale in comparison, doesn’t it?
And yet, according to a Sports Illustrated report, nearly 80 per cent of former NFL players are either bankrupt or in serious financial trouble within two years of retirement.
They are not alone. America’s top basketballers earn on average around $US6 million a season. But an estimated 60 per cent of former NBA players are broke.
As a young sportsperson starting from nothing, being catapulted into the world of professional sport and getting paid to pursue your dream, whether a multi-million dollar figure or a more modest $100,000-$200,000 in the most common AFL pay bracket, must feel like winning Lotto.
Throw in a sudden entourage of new-found ‘friends’, a few bad investments and some frivolous spending habits, and a lucrative career risks going down an ominous path. So how do our professional athletes manage their money and avoid making the same mistakes as many of their US counterparts?
AFL player manager Peter Lenton represents 30 players at different stages of their careers, and sees tackling tough contract negotiations at the start of a player’s career as only the tip of the iceberg.
“There’s uncertainty around how long you’ll be in the game, so I see my responsibility as an agent to look after the financial aspect and make sure players can be comfortable and when they leave the game, be mortgage-free for the rest of their lives,” Lenton says.
NRL players are even working towards insuring themselves against earnings lost through serious injury for the length of their contracts. Times have certainly changed since the code started in 1907 as a breakaway from the Rugby Football Union, which didn’t compensate players for time off work for tours or injuries, and when Australia’s best player, Dally Messenger, was lured to league for all of £50 and a place in the New Zealand 'All Golds' team bound for England.
Both the NRL and AFL require their player agents to undergo accreditation programs to ensure they are a trusted and qualified representative with players’ interests as their priority. Agents in the NRL must attend annual competency workshops and sign up to a strict code of ethics including a commitment to use “best endeavours to maximise players’ earning potential in the most effective manner” using “duly qualified professional advice respect to financial management, taxation and legal issues”.
At the core of many agents’ philosophies lies the phrase ‘Life after football’, an idiom that has evolved from educating players to think long-term. Lenton’s experience heading his own accountancy business has taught him the importance of flexibility to suit the individual, tailoring to their contract and personality. The strategy for his newest client, Western Bulldogs recruit Luke Dahlhaus, will naturally differ from that of well-established players like Sam Mitchell, Nick Maxwell and Brad Sewell, and former Hawthorn and Essendon player Mark Williams, who Lenton is assisting after his playing career was cut short by injury.
But despite vastly differing circumstances, Lenton insists all of his clients are committed to the basic principle of a long-term savings plan. They must buy-in to an “earn more, save more” mentality rather than spending money because it is there.
A new player will be set up with a savings account that earns interest, along with a debit account to take care of bills rather than providing the temptation of being wasteful with cash.
“If they can live off $250 a week and know that their phone, car, food and other essentials are paid for, then after a year or two they are shocked at how much they’ve managed to accumulate,” Lenton says.
“The next step, if they get a contract extension with their club, is looking towards other investments like the share market or capital-guaranteed products.”
You won’t find Lenton’s clients driving around in flashy cars for the kudos, no matter how famous and successful their career has made them. Hawthorn captain Sam Mitchell is living proof.
“He really hasn’t changed his lifestyle that much,” Lenton says. “He now has a wife and kids, he has several properties. He and his family have everything they need, but he still manages to live within his means.”
As a famous sportsperson aiming to keep your head screwed on, having a trusted agent who not only understands your industry, but cares about you, is a wise investment. High profile figures being embroiled in dodgy scams make headlines from time to time, but approaches from “businessmen” are more common than people might realise.
“Players get approaches all the time. Business opportunities can go sour pretty quickly. And if there’s an emotional investment, they need someone who can look at the figures in black and white and make a recommendation,” Lenton says.
And the Rookie Financial Handbook, put together by a US financial firm agrees: “Learning to say ‘no’ is a good thing,” it says. “Just because you can afford it, doesn’t mean you should say ‘yes’.”
It’s not just professional sportspeople who can benefit from such advice; even average earners can profit from the same principle. Afterall, what’s the point of earning millions of dollars a year if you can’t save a dime?