Financial Planning for Professional Athletes: Budgeting for Long-Term Success

The Importance of Budgeting 

When a young professional athlete becomes a client, one of the first topics we address is how to build a budget and why it’s essential. We ask athletes a simple but significant question: “What does it cost to be you?” 

Here are a few of the first considerations: 

1. Where does the athlete live? Housing is often the largest expense in a budget. Depending on the size and length of the athlete’s first contract, renting rather than buying a home may be a practical option to consider. The possibility of being traded or simply wanting to live in a different part of the city (unsure of the new area) can make purchasing a home too soon a costly decision, especially when considering brokerage fees and taxes. It may be best to wait until a second contract is secured before making a large real estate investment.
2. Does the athlete own or lease a vehicle—or multiple vehicles? Vehicles are another significant expense that can quickly impact an athlete’s budget. For many, purchasing a car ranks high on their wish list after signing their first contract. It’s important to consider how often the vehicle will be used and whether owning or leasing is the better financial decision. Owning multiple vehicles can become a serious budget strain as the cumulative monthly expenses can quickly add up.
3. Is the athlete providing financial support to family members? This is often one of the most challenging issues we encounter in financial planning for professional athletes, particularly when it comes to balancing generosity with long-term sustainability. It’s common for close family members to request financial help, and while we understand and support the desire to assist loved ones, it can place a substantial burden on the athlete’s finances. Beyond the immediate costs, supporting family members can also affect long-term planning, such as estate tax exemptions. Helping the athlete make thoughtful, sustainable choices here is crucial. We’ve seen many cases where funding the expenses of a large group of friends or putting others “on the payroll” has led to excessive spending and, in some cases, bankruptcy. Establishing clear financial boundaries is essential for long-term stability.

Key Budget Considerations 

There are financial realities that often surprise new athletes—two of the biggest are taxes and inflation.

1. Taxes & Fees: After accounting for federal and state taxes, as well as agent and management fees, many athletes net only about 50% of their total salary, according to research from SDO CPA. This can be a shock to new professionals who start spending as if they’re earning the full amount. For example, a $10 million salary can be closer to $5 million in take-home pay.
2. Inflation: Many young athletes don’t fully understand the impact of inflation and how it affects long-term purchasing power and budget creep. For example, if someone spends $25,000 a month today, and inflation averages 3% per year, that monthly cost would more than double to over $50,000 in 25 years. Inflation is an often-overlooked factor in financial planning for professional athletes, especially for those new to managing large sums of money. It’s hard for a young athlete not to notice what veteran players own—whether it’s luxury cars, designer clothes, or expensive jewelry. It’s easy to get caught up in that world and overlook the long-term impact of spending $100,000 on a car or watch. As we consistently remind our clients, cars and clothes usually lose value after you buy them. Investing that same $100,000 instead of spending it on a material item can be life-changing. That’s why we emphasize the role of building a diversified investment portfolio can has the potential to grow faster than inflation over time—and why we encourage prioritizing long-term investing over high-cost purchases that typically don’t offer a return.

Conclusion 

Our goal is to help athletes protect and grow their wealth so they can live comfortably long after their playing days are over. By making smart financial decisions early in their careers, short-term earnings can be transformed into lasting financial freedom. 

In this Financial Planning for Professional Athletes blog series, we’ll continue exploring the key financial topics we discuss with our athlete clients and their families. Up next: the importance of saving and the powerful role compounding interest plays in building long-term wealth. 

If you’re looking for guidance in building a portfolio designed for long-term success, we’re here to help. Schedule a conversation with us to discuss your situation.