The Olympians competing in Sochi have little room in their thoughts for anything beyond a winning performance. But those who come away with a medal and potential sponsorships should begin planning their financial future as soon as they complete the victory lap.
Most of the athletes who earn a spot at the Olympics are still fairly young and at the beginning of their athletic careers. Advance financial planning is crucial, given the risk of loss of income from a career-ending injury and the fluctuating nature of sponsorships and endorsements.
The key is to get the spending ratio right and remain grounded about finances, says Herb Hopwood, president of Hopwood Financial Services in Great Falls, Va. When times are good, he adds, "the temptation is to say this will go on forever, but you have to see the reality."
Hopwood, who played a summer tour of professional tennis in Europe when he was younger, says athletes have to think of themselves as having a low income and curb spending accordingly. "It's similar to a sales person whose income is based on commission. They have to spend at a lower level than what they are bringing in."
The future is closer than you think
Hopwood recommends that windfalls, whether from sponsorships or individual wins, be put toward intermediate or long-term financial goals. Intermediate goals, typically those within five years, might include buying a home, for example. Long-term goals would include retirement or supplementing a second career if needed.
The important thing, he adds, is that windfalls don't lead to a higher spending level. "That's a recipe for disaster," he says. Recognizing that temptation to buy a sports car is strong, Hopwood suggests carving out a small portion of the windfall -- maybe 10 percent -- for a splurge.
While it's difficult for a teenager or young adult to think about retirement, Hopwood says superior athletes are goal-oriented in their sport and can tap into that same mindset when it comes to financial planning.
"We advise that anyone, not just athletes, start with the end in mind. Set goals and spend time dreaming a little to prioritize the goals and winnow them down to three," Hopwood says. "If you can do that, it drives all your decisions and keeps you away from impulse purchases."
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