By Iacovos Iacovides, APC Sports Consulting, Nicosia, Cyprus
Some of you may be acquainted with the ‘Sudden Wealth’ phenomenon.
This phenomenon relates to individuals who suddenly find themselves making exponentially more money than they previously did. The phenomenon is magnified when these amounts are six, seven, eight digits or even more.
Athletes not only have themselves to deal with such wealth, but also those around them: family, friends, coaches and partners.
You have managed to get that lucrative contract; you are living your dream; doing what you love whilst making very good money. But it is not all rosy: there is a fair chance that suddenly some of those people, who supported you throughout the years, have finally turned up to collect; or, even worse, people, who were only on the margins of your journey, now want to be your best friend, favorite uncle and so on.
Unfortunately, the great majority of athletes have to deal with people demanding a share of their success from their inner circle – their family – which, undoubtedly, has an emotional dimension to it.
For example, Phillip Buchanon, a former NFL player and author of ‘New Money: Staying Rich’ reveals, in a rather shocking statement, how his relationship with his mother was affected by his new contract:
“Soon after the draft, she told me that I owed her a million dollars for raising me for the past eighteen years. Well, that was news to me. If my mother taught me anything, it’s that this is the most desperate demand that a parent can make on a child”
The above statement can be very revealing as to how the emotional pressure that is put on athletes can make them cave.
Not everyone, of course, will experience pressure of this magnitude, but small things pile up whilst creating bad precedents, such as always paying the bill at the restaurant or the bar.
It is no coincidence that financial advisors agree that family pressure is amongst the primary challenges that young athletes have to face and one can only imagine how such pressure can have an adverse impact not only on the athlete’s finances but also his/her mental wellbeing.
As if having to deal with people you know – or think you did – is not enough, you also have to deal with the professional sponges.
There are certain people out there who, if you ask them what they do for a living, they might as well identify themselves as ‘professional leeches’ because all they do is hang around famous people befriending them, seducing them and ultimately living off of them financially.
All these are enough to drive someone to paranoia.
It can certainly be soul-destroying not to be able to make new friends, acquaintances and develop personal relationships when you know that certain people out there are only after the money and not the athlete.
There is plenty of evidence of marriages ending shortly after an athlete’s retirement or after the athlete went broke. Nonetheless, this is a reality that athletes have to deal with, neither by blindly trusting every person, who wants to hang around them, nor by blocking everyone out. What they rather need, are solid foundations and to utilise certain mechanisms, such as prenuptial agreements, alongside those foundations.
This story would not be complete without those “great investment opportunities” that are constantly being presented to you.
People from all lengths of society, people you love, people you trust, people you do not know will come knocking on your door for you to invest “in their great idea” and that they really are “doing you a favour”.
Whether it is your cousin with his “amazing new food delivery app” or a random person who “knows” that the value of Bitcoin will rise (which, in fact, it has), you should always take a step back and discuss these things with an expert – hopefully, you have a professional financial advisor for this purpose. You never know in which corner the next ‘Ponzi Scheme’ is lurking!
Many young athletes find themselves making a lot of money out of the blue which, in itself, can be a lot to handle. Then they also have to deal with the fact they have suddenly become everyone’s favourite. Whether we are talking about people who want some cash, or want you to invest in their great idea, or just want to live off you, you have to learn how and when to say no.
The first necessary step is financial education – ‘financial literacy’ – coupled with the cultivation of the right attitude and the assistance of experts. The only way to avoid these traps is to be aware of their existence and learn how to identify and deal with them, when you encounter them, with professional assistance.
What better time to start than at the beginning of a New Year!
For more information, see ‘https://moneysmartathlete.com’