The following is a guest post from Andrew Pandolfo, RFC®, AAMS® , Financial Advisor at Raymond James.
There are very few certainties in life: death, taxes, and learning new things. With so much of our lives uncertain, it is essential to plan for the unknown. I have worked with an array of different clients at varying points in their careers. I’m passionate about helping professional athletes, and their families find answers to the questions that keep them up at night.
Most professional football players do not have a 30–40-year career; the average football career is a little over three years. I believe my team’s financial playbook may be a valuable resource to many rookies in this year’s draft class.
When planning for first-year players, it is important to account for different variables such as where the player lives (what state), how much they pay for rent, how much their brand-new home costs, how much it is to insure their jewelry collection, how much they pay for their car (monthly payment, and tax payment), how much they spend on training, how much they spend on entertainment, restaurants, and traveling. I have researched and discovered many of these variables, such as rent for a three-bedroom apartment in each team’s city, state income tax, cost of training and health, and what a player could afford if they were to buy a home. Their lifestyle is much different than the average American worker – they need specific planning to help them navigate the various challenges that lie ahead.
The first certainty I plan for is emergency, injury, or death. First, we need to understand the player’s specific situation do they have a significant other, partner, or spouse, or have children or others depending on them. These factors go into understanding what we need to do to replace the income lost if something terrible happens to the player.
The second certainty that I plan for is taxes. We take the time to educate the players we work with on how taxes work for their situations. The first-year professional football players are usually high-income earners, mainly in the highest personal income tax bracket. We will help them understand what they make after taxes – for example, if a rookie gets drafted by one of the NY teams and signs a $1 million contract for four years – the net income after taxes is roughly $500,000 (32.5% federal taxes, 7.10% state income, 4.11% local income ~ approximately 43.70%)
The last certainty I plan for is how to save their money after paying taxes and expenses. When we work with a player, we show them our customizable Cash Flow sheet – where we take their expenses, estimate future ones, and show them what they have left after taxes are taken out, and all expenses are paid. We use this dollar amount to set up our “Trips Financial Gameplan.” In this plan, we save for three different accounts: short-term (emergency), mid-term (goals and expenses), and long-term (retirement). By saving in a bucketed approach, we can give our athletes the flexibility to invest in business opportunities, create a business, or go back to school to learn something new. We will work with the player and show them the impact of saving according to our fundamental rule. These game plans are 100% customizable and completely complimentary; our goal is to give players more flexibility and freedom while generating wealth. My mission is to educate and create long-term generational wealth for the players I work with.
Any opinions are those of Andrew Pandolfo and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Keep in mind that there is no assurance that any strategy will ultimately be successful or profitable nor protect against a loss. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James, we are not qualified to render advice on tax matters. You should discuss tax matters with the appropriate professional.