Professional athletes are often thought of as some kind of superheros that are immune to the problems faced by “ordinary” folks. That is far from the case, especially as far as Covid-19 goes. The pros are facing the same kinds of physical, emotional, and even financial challenges as the rest of us during this pandemic.
As with anyone, good financial management for an athlete starts with budgeting. As an accountant to athletes, I always encourage my clients to prepare for the proverbial “rainy day”. This can sometimes be a bit tricky for high-income earning athletes who are not used to having to limit their spending.
Usually I will work together with the client to set a budget at the beginning of the year which I can then hold the athletes accountable to. Typically, we will then review the budget monthly to ensure our projection stays in line with what the athlete has committed to.
For team athletes, of course, the financial department of the team is part of the equation. We will keep their team advisor, manager, accountant, controller, etc., in the loop so that they know exactly where the team member stands each month. Keeping everyone on the same page allows everything to run smoothly. Should an unexpected cost arise, when the team knows where everything stands, it allows us to work together to brainstorm the best possible outcome.
However, even with the best laid plans, the coronavirus has thrown a wrench into the process. Before Covid-19, in most cases we could fairly accurately project a given athlete’s income and expenses for the year, but with the pandemic, that has all changed.
For example, this was particularly true of Olympians who had to deal with the postponement of the 2020 Summer Olympics in Tokyo. Olympic athletes often struggle financially even in the best of times, looking at prize money, stipends, sponsorship, and sometimes speaking fees to make a decent a living. Some even have to work additional jobs to support their athletic pursuits.
The chaos caused by the coronavirus now means that, like many Americans, some Olympic hopefuls are struggling financially.
Speaking to USA Today, US Olympic and Paralympic Committee chief executive Sarah Hirshland said, “For many of them, they are the classic gig workers and have been before that was a thing. They do speaking engagements, appearances. While in any one instance, those may not be significantly lucrative, but many of them together provide a living for some of these guys and a lot of that has dried up.”
For such Olympians, that means difficult times for their training and for their finances.
Similar challenges are faced by the pros. Many of our clients went back to their hometowns and left the large cities to be with their families during the virus outbreak.
For some of them this meant finding a new group of professionals they could work with daily to stay in shape. From a chef to personal trainer, a lot of planning had to be put into place, so everything could run smoothly.
With having to make these kinds of adjustments, I had to have a lot of conversations about saving while dealing with a pandemic. For a group of professionals who rarely have had to curtail their spending, this proved to be difficult.
We held many “tough conversations” with our clients to see what expenses could be reduced for the time being. That meant going back to basics, such as reemphasizing understanding the difference between “needs and wants,” to reduce personal spending as much as possible during the ongoing pandemic.
In addition to curtailing unnecessary spending, here are some other tips I advise my athlete clients, which apply to anyone struggling with finances during the pandemic.
- Prioritize and keep up with your bills – One of the most important things you can all do right now, is to do your absolute best to keep up with your bills
- Keep your money in the bank – Leave your money in the bank where it is safe, and you are less likely to overspend it
- Invest – If you do still have a steady income, and are making ends meet, now could be a great time to invest. As long as your income is stable and you have robust savings, you should consider bumping up your 401(k) or Roth IRA contributions, and if you don’t have one of these accounts set up, now may be a good time to get started.
The bottom line for pro athletes – and for anyone – is to be prepared for the worst-case scenario. Even before the Covid-19 outbreak, I would ask a client, “If your career would end today, what would happen next?”
If you aren’t prepared to answer that question then you need to work on that. You need to sit down and evaluate just how much money is truly needed to run your everyday life, and what would you do if that monthly income just suddenly stopped?
David Berdugo is manager for the sports and entertainment department for the MBAF accounting firm.