Posts
 |
| Mike Tyson |
1) Gross vs. net income: It occurs over and over again that
after one of my athletes get their first check
they call me and say something is wrong. They are floored by how much of their
check is taken out for taxes and other deductions. Unfortunately, many athletes
and celebrities think they are making more than they are. In some states such as California and New
York nearly 50% of their paycheck can be taken out for taxes. Then add in your agents’ fee, city tax, 401k
deductions, union dues and your left with just a fraction of what you started
with.
2) It comes too fast and easy: For athletes first it’s a college scholarship, then comes the advances and
stipends from agents once you declare your eligibility for the draft and the large
signing bonus. For entertainers it’s
that hit song or TV show. When money comes easy young athletes and actors
assume that it will always be that easy.
It’s not, after your athletic or entertainment career is finished, you
will need to go out and a regular job. I've seen many young people come to me
after their career is finished asking for help, by that time it’s too late. They've been spending like the money will always be rolling in. They’re often
stuck in a $50, 000 a year job with $10,000 a month in mortgage, car, and
credit card payments.
3) The cost of bling: Customized cars, rims, jewelry and custom made clothes seem to go
hand-in-hand with athletes and celebrities. I would estimate that 90% of all
athletes and celebrities have gotten ripped off buying cars or jewelry. There
is obsession in Hollywood and athletic circles to have the latest and greatest
toys, the biggest house(s), the newest car(s) and the most expensive clothes. One
thing I always tell my clients is that if it depreciates in value, it’s not
wealth management.
 |
| Lawrence Taylor |
4) Poor financial counsel: Time and time again I run across
players and celebrities that have hired family members, friends or advisors
new to the business to handle their financial affairs. This is the biggest
mistake you could make. Not only to they
lack extensive the industry knowledge that is needed it’s very difficult to
fire your best friend or parent if they lose your money. They are also unable
to make the hard calls and control your spending when it’s needed most. We always take time to educate our clients,
set budgets and monitor our clients progress towards their financial goals.
5) Bad investments: Bad real estate deals, new
restaurants, music production companies are just a few of the ways to end up
broke. Unfortunately con-artist and
others seek out naive young stars to steal their cash, but in many cases they
themselves seek out high risk endeavors that cause financial hardship. Then
there are the family members and friends wanting to start a new business or
needing loans. The best advice I give clients is to learn how to say NO early
and often. If you can’t say no, you need an advisor that can do the dirty work
for you.
6) Guilt and the family: It’s unfortunate but many athletes come from single
parent homes or are raised by their grandparents. Usually they have a very
tight extended family that offers support while growing up. Once the paychecks
start coming in many athletes feel the need to give back to these people. For some there is even a deep feeling of
guilt. To alive this guilt athletes and celebrities start buying these people
houses, and cars. Many will also pay for
trips to the Bahamas’, Hawaii, and Europe. Be very careful of falling into this
trap, because once the money faucet is turned on it’s hard to turn the faucet
off.
 |
| Allen Iverson |
8) Divorce: Say goodbye to 50% of everything you have! The divorce rate with athletes
is second only to Hollywood. Many find it difficult to make the transition from
super star to average Joe. Once the fame, status and money are gone marriages
can be stress to the point of divorce. In many cases athletes and celebrities
fail to protect themselves by having a prenuptial agreement in place.
9) Living above their means: I constantly remind my clients that they should live a
lifestyle just above their peers. Their
peers are those that you graduated college with, not the All-Pro in the
locker-room or the Oscar winning actress. The median household income in the U.S. is
only $50,054. I recommend that any money
made above your peers should be saved, invested and allocated for future needs.
It’s okay to rent an apartment for a few years and put off buying that head
turning sports car. Remember, it’s
difficult to cut spending once you get a taste of the life style of the rich
and famous.
10) Keeping up with the vets: Rookies often desire to live like
the vets. They want the same houses,
cars, jewelry, custom clothes and trips.
What they fail to realize is that those vets are on their second
contracts and making much more than them. Many
athletes and celebrities feel that it’s okay to spend because they will make it
up on their next deal. But what happens
if that second contract or TV show does come? Also in many cases the second
deal only brings on higher spending habits.
As a professional athlete or celebrity I cannot stress
enough how important it is to find a wealth manager that can educate, counsel
on life’s decisions, intervene when needed and act as the bad guy when it comes
time to say no. If you do, you should
not worry about making any other these ten mistakes that could leave you broke.
Athletes
and Celebrities Who Lost It All (Or Most Of It)
Mike Tyson – Boxer
Francis Ford Coppola – Oscar winning
Film-Writer-Director-Producer
Allen Iverson –NBA
Lenny Dykstra –MLB
Antoine Walker –NBA
Vince Neil – Rock Star
Kim Basinger – Oscar Wining Actress
Scottie Pippen – NBA
Richard Harris – Actor-Producer-Director
Nicolas Cage – Actor
Darren
McCarthy - NHL
Lawrence Taylor - NFL
Bjorn Borg – Tennis
Marion Jones - Olympian
Jose Canseco – MLB
George Best – Soccer
Evender Holyfield – Boxer
Willie Nelson – Singer
Bryan
Trottier - NHL
Larry King – Talk Show Host
Vince Young – NFL
Terrell Owens – NFL
Eddy Curry – NBA
Barry Bonds – MLB
Pete Rose – MLB
Michael Vick – NFL
Travis Henry – NFL
Sheryl Swoops – WNBA
Scott Eyre – MLB
Raghib “Rocket” Ismail – NFL
Warren Sapp – NFL
Deuce McAllister – NFL
Rollie Fingers – MLB
Bobby Orr – NHL
John Daly – PGA
And many, many more.
Follow me on Twitter: @RLPaler
Rick Paler is President of RL Paler
Investment Advisors, LLC and is one of the most respected Wealth Managers working
in Wall Street. He has been helping athletes
and celebrities managers their wealth for over 25 year.
