MYM #012: From Undrafted to Millionaire

In this newsletter, we're about to unravel the journey of our NFL client who just retired. 

He transformed his financial life from an undrafted free agent with a $0 net worth to an impressive $2.2 million net worth in just six years.

No guaranteed contracts.

No huge signing bonuses.

All while being cut 12 times from these 10 teams:

Why should you care? Because the lessons from this extraordinary case study aren't just for professional athletes. They hold the keys to financial success that anyone, including you, can apply to their own life, no matter their income or career.

Unfortunately, most people stumble on their path to financial security. They lack a clear strategy, often neglect vital benefits, make hasty investment decisions, and struggle to navigate setbacks. 

But there's a way to avoid these common pitfalls and build a prosperous future.

This athlete's story isn't just inspirational; it's a playbook for financial success.

Here’s what we’re going to get into it:

1. The Power of Budgeting and Planning
2. Leveraging the NFL Benefits
3. Investing Wisely
4. Exploring Opportunities Off the Field
5. Managing Financial Setbacks
6. Seeking Professional Advice

Ps, hang around until the end to check out his Net Worth progress and financial projections.

The Power of Budgeting and Planning

Budgeting is the foundation of financial success, even for individuals with substantial incomes, like professional athletes. The first step is to understand the gross earnings and the hard truth about taxes. 

Take a look at the earnings and estimated taxes over the course of his 6 year career:

• Total Estimated Earnings = $3,394,883
• Total Estimated Taxes = $1,327,752
• Income After Taxes = $2,067,131

This makes it clear that taxes are probably the most significant expense for individuals in high-earning professions.

The next crucial step was creating a financial operating system for the money left after taxes.

We implemented a 20/80 principle: after accounting for taxes and retirement contributions, 20% of the income was used for lifestyle needs, while 80% was invested for the future. 

This automated system allowed him to enjoy the rewards of his hard work while securing his financial future.

Developing a cash flow operating system is essential in any financial strategy. It ensures that earnings are allocated wisely, balancing the present with future financial security.

Leveraging the NFL’s Benefits

Athletes have access to valuable retirement benefits provided by the NFL. Let's break down what the NFL, and their teams, contribute to an athletes account after earning a 'credited season'. 

NFL Player Annuity Program:

• Season 1 = $0
• Season 2 = $2,500
• Season 3 = $2,500
• Season 4 = $50,000
• Season 5+ = $60,000

Player Capital Accumulation Plan:

• Season 1 = $0
• Season 2 = $2,500
• Season 3 = $2,500
• Season 4+ = $40,000

NFLPA Savings Plan (401k):

• 2-for-1 match up to the IRS limit. For instance, in 2022, our athlete saved $20,500, and the NFL team doubled his contribution, resulting in a total of $61,000 deposited into his 401(k).

In just six short seasons, the athlete leveraged these retirement plans not only to contribute his funds but also to maximize the NFL's offerings. 

After the 4th credited season, the NFL and teams contributed began to contribute over $130,000 towards his retirement accounts between all 3 sources.

This approach allowed him to invest in the NFL’s retirement accounts that have now grown to over $440,000, while only contributing $115,000 of his own money over his career.

Understanding and optimizing workplace benefits are critical steps toward building financial security. It begins with knowing what the athlete is entitled to, how to access these benefits, and ultimately, how to make the most of them.

Investing Wisely

Our client faced the unique challenge of playing on 10 different NFL teams and experienced being cut 12 times during his career. 

This constant uncertainty required a dynamic investment strategy each year, considering his contract, team changes, and financial goals. 

They key was to focus on 3 different buckets. 

1. Having liquid assets for short-term security.
2. Investments with downside protection if we needed to tap into them.
3. Investments with a horizon of at least 20 years.

This approach allowed us to view his investment game plan through short, intermediate, and long-term routes, ensuring smart financial decisions were made in each bucket, each year, while keeping emotions in check.

To execute this strategy, we employed a personalized investment allocation to complement the target date funds available in his NFL retirement accounts. 

Our preference always leans toward low-cost strategies, using individual stocks and ETFs for growth while using cash and bonds to safeguard his investments.

For those just starting, consider exploring beginner-friendly investment options like target date funds. These funds automatically adjust your portfolio's asset allocation based on your intended goal date, making it a simple approach to long-term investing.

Exploring Opportunities Off the Field

For professional athletes, retirement often comes in their 20s or, if they're fortunate, in their 30s. This early transition from the game leaves ample room for exploration. Preparing for life after the field is crucial.

Here’s a great conversation on the topic from Adam Breneman and Will Compton ↓

The average NFL career lasts only 3 years.

The hard reality is most professional athletes will only be relevant for a short amount of time.@_willcompton is a perfect example of a professional athlete leveraging their fame to help set themselves up after their playing days are… pic.twitter.com/uStY8xX3XG

— Adam Breneman (@AdamBreneman81) May 7, 2023

Our client also recognized the importance of diversifying his income streams and exploring opportunities beyond football. He had an interest in real estate and business ownership, which he began to pursue during his playing years.

By acquiring income-generating properties and exploring private equity investments, he gained valuable experience and set the stage for covering living expenses post-retirement.

It's worth noting that these ventures were carefully planned, with a portion of his income allocated each year. While we expect these assets to perform well over time, even if they don't, he remains on track to achieve his financial goals.

Just as he explored real estate and private equity, we encourage you to consider potential side hustles or career transitions that align with your interests and financial goals. Preparing for life after your primary career is a proactive step toward securing your financial future.

Managing Financial Setbacks

The athlete faced an incredibly challenging journey, with over being cut 12 times and joining 10 different NFL teams in just six seasons. 

Moreover, he experienced the turmoil of one of the largest stock market crashes in the last 20 years during the COVID-19 pandemic.

Like Mike Tyson wisely stated, "Everyone has a plan until they get hit in the mouth."

The athlete took hit after hit but remained resilient, both on and off the field.

His ability to persevere through adversity serves as a valuable lesson. 

Financial success is not just about creating a plan; it's about having the grit to stick with it even when faced with unexpected challenges.

Building a financial gameplan requires the recognition that life is going to change. Just as quarterbacks call audibles on the field, you may need to adapt your financial strategy. 

Flexibility and the ability to manage financial hardships are key to achieving long-term success.

Seeking Professional Advice

In the realm of professional sports, distractions and well-meaning advice are abundant. It often feels like everyone possesses a guaranteed path to wealth once you've achieved success.

However, it's imperative to discern that not all guidance carries the same weight.

Alex Hormozi said it best ↓

How to stay poor:

Take advice from poor people on how to get rich.

— Alex Hormozi (@AlexHormozi) March 7, 2022

Building a team with a successful track record is paramount.

Here's a glimpse of the athlete's team:

• NFL Agent for team placement and contract negotiation.
• Certified Financial Planner and Financial Advisor to oversee all financial matters and strategically invest capital.
• Certified Public Accountant to handle tax filings.
• Real Estate Partners specializing in property acquisition and management.
• Private Equity firm to source and vet investment opportunities.

Just as the athlete assembled a team of experts to navigate his unique financial journey, we encourage you to consider seeking professional financial advice tailored to your individual circumstances. 

A well-qualified team can make all the difference in achieving your financial goals and securing your future.

Conclusion

The athlete's journey has taken us on a remarkable path, demonstrating that financial success is attainable even amidst the uncertainties of the NFL. Here are the key takeaways:

1. Budgeting and Planning: Regardless of income level, budgeting is the foundation of financial stability. Crafting a financial operating system and strategically allocating resources can set the stage for future success.
2. Leveraging Company Benefits: Maximizing workplace benefits is a crucial step toward building wealth. The athlete's utilization of retirement benefits serves as a testament to the power of smart financial planning.
3. Investing Wisely: A well-thought-out investment strategy can withstand the turbulence of life. Balancing short, intermediate, and long-term goals through diversification and low-cost strategies is essential for financial growth.
4. Exploring Opportunities Off the Field: Preparing for life after retirement is a strategic move. Diversifying income streams and pursuing interests outside one's primary career can provide financial security and personal fulfillment.
5. Managing Financial Setbacks: Resilience in the face of setbacks and the ability to adapt are key to long-term financial success.
6. Seeking Professional Advice: Building a team of experts with a successful track record can be a game-changer.

Over the last five years, his Net Worth Statement has witnessed remarkable growth thanks to strategic investments in real estate, private equity, NFL retirement accounts and a diversified portfolio.

For now, the plan is elegantly simple: generate sufficient income to sustain his lifestyle without the need for additional savings. Instead, we'll let the power of compounding work its magic with the invested assets.

Though the journey ahead is long, if this plan unfolds as expected, it promises to be an exciting one to witness.

Here are the Net Worth projections for the next 40 years ↓

This journey highlights the significance of budgeting, planning, and wise financial decisions. By following these principles, you can chart your path towards financial success, achieving your goals, and securing a prosperous future.

Actionable Tip

Start today by creating a basic plan for your finances. Allocate a portion of your income towards savings and investments, even if it's a small amount. Remember, the key to financial success is consistency. Over time, these small steps can lead to significant financial growth and security.