Avoiding the Financial Fumbles: Common Money Mistakes Athletes Make

Posted by: Nisiar Smith 2.27.25

Avoiding the Financial Fumbles: Common Money Mistakes Athletes Make

Introduction

For many professional athletes, the journey to financial success is filled with as many risks as rewards. While some athletes build lasting wealth, others face financial ruin within just a few years of retirement. In fact, studies show that nearly 78% of former NFL players experience financial stress within two years of leaving the league, and 60% of NBA players go broke within five years of retirement.

So, why do so many athletes struggle with money? The answer is simple: poor financial decision making. From reckless spending to bad investments, many athletes make the same costly mistakes-mistakes that could be avoided with the right financial game plan.

In this article, we’ll break down the most common money mistakes athletes make and how to avoid them so they can protect and grow their wealth long after their playing days are over.

1. Living Beyond Their Means

The Problem:

One of the biggest financial traps athletes fall into is lifestyle inflation; spending more as their income increases. Lavish mansions, exotic cars, and luxury vacations may seem like small purchases when multimillion dollar contracts are rolling in, but this kind of spending adds up quickly.

Many athletes fail to consider:

Career Length: The average pro sports career is short (3.3 years in the NFL, 4.5 years in the NBA, 5.6 years in MLB).
Post-Career Earnings: Most athletes won’t earn the same level of income once they retire.
Taxes & Fees: A $10M contract is not a $10M paycheck; taxes, agent fees, and expenses take a big cut.

The Fix:

Live below your means. Instead of spending as if every year will be a record earning year, budget based on long-term financial security.
Follow a disciplined saving strategy. Athletes should set aside at least 50% of earnings to ensure financial stability beyond their playing careers.
Start small, then upgrade. Buy a house or car that fits within a sustainable financial plan before making luxury purchases.

2. Failing to Plan for Taxes

The Problem:

Many athletes don’t realize that their high earnings come with high tax responsibilities. Without proper planning, they can end up owing millions to the IRS.

Key tax challenges for athletes include:

Jock Taxes: Athletes must pay taxes in every state where they play, which adds up quickly.
Federal & State Taxes: These can take 40-50% of earnings, leaving far less income than expected.
1099 Income from Endorsements: NIL deals and endorsements require athletes to set aside money for taxes upfront.

The Fix:

Hire a tax professional. A CPA who specializes in athlete finances can help navigate multi-state tax laws.
Set aside money for taxes. Athletes should allocate 40-50% of every paycheck for taxes to avoid surprises.
Use tax-efficient strategies. Contributing to retirement accounts and making charitable donations can help reduce tax burdens.

3. Making Bad Investments

The Problem:

Many athletes try to “flip” their money by investing in high risk ventures without doing their homework. Common bad investments include:

Investing in friends’ and family’s businesses without proper due diligence.
Risky or unverified investments (crypto, unregulated startups, etc.).
Over concentration in a single investment instead of diversifying their portfolio.

The Fix:

Do your research. Every investment should be backed by data and expert analysis.
Diversify your portfolio. A mix of stocks, bonds, real estate, and business investments minimizes risk.
Work with a trusted financial advisor. Someone with experience managing wealth for athletes can help avoid bad deals.

4. Not Having a Financial Plan

The Problem:

Athletes often focus only on short-term earnings without a long-term financial strategy. Many retire without a solid plan, leading to financial instability.

The Fix:

Start financial planning early. The sooner an athlete creates a financial game plan, the better.
Set clear financial goals. Define short-term and long-term objectives, such as buying property, saving for retirement, or starting a business.
Have an exit strategy. Athletes should plan how they will generate income after retirement.

5. Trusting the Wrong People

The Problem:

Many athletes lose millions because they trust the wrong advisors, agents, or business partners. Unfortunately, financial scams and fraud are common in the sports world.

Common scams include:

Fraudulent investments or Ponzi schemes.
Overpaying for financial management services.
Family and friends mismanaging money.

The Fix:

Vet financial advisors carefully. Work with certified professionals who have experience managing athlete wealth.
Avoid handing over full control. Athletes should always be actively involved in their finances.
Get second opinions. Consulting multiple experts before making major financial decisions helps prevent fraud.

6. Ignoring Retirement Planning

The Problem:

Many athletes assume their earnings will last forever, but retirement often comes sooner than expected. Without a plan, they can burn through their savings quickly.

The Fix:

Contribute to retirement accounts early. Maximizing 401(k)s, IRAs, and other retirement plans ensures long-term stability.
Invest in assets that generate passive income. Real estate, dividend stocks, and business investments can create steady income post-retirement.
Plan for post-career income. Whether through broadcasting, coaching, or business ventures, athletes should explore ways to generate income after their playing days are over.

7. Failing to Protect Their Wealth

The Problem:

Without the right protection, an athlete’s wealth can vanish quickly due to:

Lawsuits & legal disputes.
Divorce & financial settlements.
Career-ending injuries.

The Fix:

Have the right insurance. Disability insurance, life insurance, and liability insurance protect against unexpected financial losses.
Use estate planning tools. Setting up trusts and wills ensures financial security for future generations.
Be cautious with relationships. Prenuptial agreements and clear financial boundaries can prevent financial disasters.

Final Thoughts: Play Smart with Your Finances

A professional athlete’s career may be short, but smart financial decisions can create a lifetime of wealth. By avoiding these common money mistakes, athletes can protect their earnings, grow their wealth, and secure their future long after retirement.

Are you ready to take control of your financial future?

Let’s talk. If you need help building a financial game plan, schedule a consultation today and start making the right money moves!