How college and pro athletes can navigate the wealth of brand deals and contracts

For many college and professional athletes, the glory of winning and the agony of defeat aren’t limited to the field. The initial thrill of a brand deal or multimillion-dollar salary can quickly turn into financial ruin if athletes are unprepared and inexperienced about managing their money.

“It doesn’t take many wrong financial decisions to lose a fortune,” says Angie O’Leary, head of Wealth Planning at RBC Wealth Management–U.S. 

More than ever before, this issue can be compounded by extreme youth, with even college athletes now able to benefit financially from their name, image and likeness (NIL). In 2023, The Athletic reported that a five-star football recruit had signed an NIL deal that could be worth more than $8 million by the end of his third year of college.

For athletes who get a shot at the professional leagues, some will sign highly lucrative contracts. However, many pro athletes have shockingly brief careers.

According to research by the RBC Sports Professionals group, the average career length for a professional athlete is generally between five and seven years. That heightens the need for specialized wealth planning that will take an athlete from their first million dollars through a potentially lengthy retirement.

Sudden riches and fame

It can be overwhelming to be on the receiving end of a financial windfall, O’Leary says. Signing an NIL brand deal or that first professional contract may be intoxicating, but all too often, many athletes don’t realize the importance of seeking professional guidance to help manage their finances.

Part of the problem is there’s no time to adjust to the dramatic change in income. “It’s not isolated to pro athletes,” O’Leary notes. “We tend to find it in situations where people come into wealth suddenly, whether they won the lottery or had a liquidity event from the sale of a business.”

Recipients of sudden wealth don’t have years of money-management experience on their side. “If people grow wealth slowly over time, by the time they are ready for distributions, they’ve developed some of the skills to manage it,” she adds.

Pro athletes also discover that their fame often affords entry into the rarefied lifestyle of celebrities, says Susan Bradley, founder of Sudden Money Institute and member of the Financial Education Advisory Board for the NFL Players Association.

“There are a lot of concierge services built into their life because of who they are,” Bradley says. When athletes are getting VIP treatment, they can become insulated from the real world of day-to-day finances and end up overspending as they get accustomed to a richer lifestyle.

Spending big without a spending plan

Youth, peer pressure and an unfathomable sum of money can easily lead to overspending. Athletes who refuse to acknowledge that their future income is dependent on the next contract typically ramp up spending to a level that’s not sustainable over a lifetime.

O’Leary says many athletes who sign a seven-figure contract at a young age often don’t see the consequences of spending because they’ve just come into an amount of money that could make any purchases seem reasonable. “It doesn’t even have to be dramatic spending,” she says. “It could be buying a home or two, but those first contracts can be spent pretty quickly.”

Developing new attitudes about money

Fiscal education is typically not enough to put athletes on the right path to a solid financial future.

But increasingly public tales of athletes making regrettable financial decisions that left them bankrupt have helped reinforce the importance of fiscal responsibility, Bradley notes. “They hear it and they know it. Some say, ‘That’s not me,’ or ‘It won’t happen to me,’ but others try not to be a cliché.”

Counteracting the celebrity-athlete culture that encourages a lavish lifestyle requires more than just teaching money management skills. “The best way I’ve found to make a difference is to help them understand what we call their ‘money story,’ which is basically the hardwiring they learned as a kid,” Bradley says.

Whether they recognize it or not, everyone has absorbed money lessons in childhood and their behavior as an adult reflects these habits. Athletes are in a better position to reject bad habits in favor of developing good ones after they’ve exposed the roots of their attitude and behavior around money, Bradley says.

The upside of working with athletes on a fiscally responsible approach to wealth is they are very focused on goals, Bradley adds. “I go right to their strengths: They’re disciplined and easily coached.”

She teaches them to practice good habits early while they’re still earning big paychecks. “I tell them if they save 30 percent, or even 50 percent of their income now, they won’t even feel it.” With good spending habits, they can keep some of their luxuries during the years they earn less.

A new investment playbook

Wealth planning for pro athletes can seem counterintuitive to the average person. A career arc in more traditional professions can span 50 years with employees usually realizing their highest earning power the closer they are to retirement. But for athletes, the high-earning years usually come sooner, followed by many years of little or no income. Investment rules are different in this scenario, O’Leary says.

“Typically, people can take investment risk at younger ages because they have a better idea of their time horizon [for accumulation] and can ride out the market cycles,” she says, pointing out that many people plan to take distributions from their portfolio after they’ve allowed it to grow for 30 or 40 years.

Another challenge is there can be very little time for athletes to transition from saving for retirement to spending in retirement. “The time horizon for when they need the money is potentially short,” O’Leary says. The possibility of early distributions and the volatility of an athlete’s salary should be carefully considered in a portfolio that initially errs toward safety rather than risk.

Risky ventures

With a large paycheck in hand, pro athletes can be attracted to risky business ventures. The temptation to put your name on a restaurant is hard to resist, says Bradley. “It’s kind of the cool thing, but there have to be policies around tangible investments.”

Bradley advises athletes to work only with highly credentialed financial advisors who will do due diligence on investments and help them set up a manageable budget.

“Don’t make it complicated,” she adds. “Adopt a disciplined saving program, pay off credit card debt in full every month, and only work with legitimate financial advisors. Even those three policies will make a big difference in their success.”