You’ve advanced in your coaching or executive level career with increased responsibilities, and then suddenly you find yourself with a significant increase in salary. This can make it challenging to plan for your financial future—especially when working under a one-to-three-year contract.
How do you balance the need to maintain enough short-term cash reserves to weather unexpected changes, with the desire to save for your long-term financial goals? Given the volatility of earnings, it’s no surprise that coaches and team executives tend to be risk averse—retaining a larger percentage of their wealth in cash and other short-term investments.
It’s important to develop a roadmap that keeps a balance between short-term security and longer-term planning considerations such as college savings and retirement, without leaving yourself financially vulnerable. It just requires taking a step and developing a plan with a knowledgeable advisor who works day-to-day in your industry.
Make wise financial decisions
Not only does your profession often require frequent moves, it can also result in large changes to compensation. When that happens, it’s easy to fall prey to ‘sudden money syndrome.’ Because these jumps aren’t just financial—they involve stature, visibility and expectations—the big house and expensive car may seem like necessary trappings of success.
With a new job, you need a place for you and your family to live. You visit your new city, tour homes with a realtor and begin running numbers in your head. How much would my down payment be? Where will that money come from, as I haven’t sold my current house and don’t have much savings? What will my mortgage payment be and, equally important, what will it cost monthly to run the house with utilities, insurance, property taxes, maintenance, etc.?
In your profession, owning isn’t always preferable to renting. You need to assess a variety of factors—the duration of your sport’s season and schedule, the current real estate market, and your personal situation (e.g., whether your children are younger or older)—to determine what makes sense for you. As part of the financial planning process, we can help you work through the renting versus buying calculus; and should you decide to buy, we can help you determine an optimal price range along with the associated costs beyond the down payment and mortgage.
Case study: Let the buyer beware
A rising football coach and his wife engaged us to help them evaluate mortgage options related to a move for his new job. During our initial conversations about the pros and cons of 30-year fixed, 15-year fixed and adjustable rate mortgages, the couple agreed that this would be a terrific time to incorporate financial planning into their decision-making process regarding a housing budget and mortgage type.
After working with the family to draft a financial plan (a first for them) and discussing their long-term career and financial goals, we suggested they consider either renting in their new city or buying a modest home (less than they could afford) that would be easy to sell. In all likelihood, his current career trajectory would mean a head coaching opportunity in a few years. We also reminded him that if his current head coach departed, he might have to look for a new opportunity—something totally out of his control.
Through the planning process, we also learned about several former employer retirement plans which we were able to consolidate into a Rollover IRA for convenience and simplicity.1 We then conducted a life insurance needs analysis and were able to help advise the couple on appropriate coverage (something they hadn’t addressed since before having children), and completed both their estate plan and a college savings plan for their two young children.
Together, we were able to complete all these important planning issues over several months, and addressed many other financial goals over the next couple years. When he ultimately achieved his goal of becoming a head coach, our client had a great financial foundation to build upon, without the stress or time that would have been required if he were starting from scratch.
The Time is now
When compared to professional athletes you generally have a much longer earning career—an advantage which can sometimes lead to procrastination. Given a high salary, it’s easy to think you can put off saving for the future and focus on short-term needs and wants because you’ll still have plenty of high earning years left. But in talking with your peers who’ve experienced sudden change—both positive and negative—you’ll quickly come to realize how important it is to have a financial plan.
We’ve built a specialty practice around coaches and executives, focused on understanding the unique financial challenges and uncertainties associated with your chosen profession. We also have the capacity to provide non-traditional lending solutions and preferred mortgage terms, as well as the investment expertise to help you achieve financial confidence in an uncertain world.
As a coach or team executive, so much of your future can be dictated by things outside of your control—from key player injuries to ownership changes. It’s not about being afraid of losing your job, it’s about being aware of the potential volatility associated with your chosen career and saving accordingly. You live and breathe your job. It can be a 24/7 all-consuming challenge. Make sure you have a trusted advisor focusing just as hard on you and your family’s financial bottom line.