Most of us would assume that once you make it to the big leagues, whether its baseball, basketball, football or other, your financial future should be secured. After all, how could one squander millions of dollars and throw away everything they worked their entire career for. Alex Rodriguez, former New York Yankees great, will tell you stories of many an athlete who has gone from rags to riches and back to rags.
Professional baseball in the U.S. is scouting and signing kids as young as 12 years old. These are predominantly teens and young men from impoverished nations like the Dominican Republic, Haiti, Cuba, etc. These teens are offered hundreds of thousands of dollars, if not more, to sign a contract with a big-league MLB team. Imagine a 13-year-old who has little to no education and cannot speak English attempting to negotiate this path. Current MLB rules don’t allow minors to obtain agents for advice. This perfect storm is at the crux of what develops later in life due to the mentioned circumstances.
“Being in the industry for over 25 years now, I’ve seen so many great people that were teammates of mine, colleagues of mine, people in sports that have gone from rags to riches to hard times again,” Rodriguez says. The National Bureau of Economic Research finds many retired NFL players file for bankruptcy soon after they retire, indicating that their median earnings of $3.2 million were poorly managed. The research shows that initial bankruptcy ﬁlings begin to occur very soon after retirement and continue at a substantial rate through at least the ﬁrst 12 years of retirement.
Rodriguez is both a peer and current business professional who can relate to the ups and downs of the athletes’ financial career. Rodriguez is an avid entrepreneur and the founder and CEO of A-ROD Corp., an entity focusing on real estate investments, fitness, philanthropy and entertainment ventures. A-Rod offers the following tips for players who have a large income for a short duration of time. However, his principles will work for you as well.
Educate Yourself First: You don’t have to become Warren Buffett to be successful with your large lump-sum payments. You need to have enough knowledge to know how to understand what your agent or financial advisor is investing your money in. That disco or Arabian horse farm in Miami may sound cool to a 20-year-old, but how solid of an investment is it. If you already have basic knowledge but need some hands-on help, there are free programs available to walk you through your financial situation. Capital One offers free money coaching to help individuals identify their financial goals and come up with solid plans to make them happen.
Surround yourself with the Right People: If you’re hanging with P Diddy or running with Darius Rucker make sure they are picking up the tabs. One way to stay on track with your financial goals, whether that’s saving for your future or sticking to a monthly budget, is by surrounding yourself with like-minded people who will support your plan. “Put yourself in a position to win—not only now but in the future,” Rodriguez says. “You do that by surrounding yourself with great people who have high character and have the proper alignments with you and your family.”
Know the Bottom Line: It doesn’t matter if you’re paid millions or median wages ($923 a week according to the Bureau of Labor Statistics); you need to know where you stand each month with your money. “One of the things we always talk about is know your numbers, and I watch the bottom line every month,” Rodriguez says. “And I do that with the company that we own, I do that with our management team, our real estate—and I also do that for my own personal life. No one can do that for you—you need to do it yourself.”