How Professional Athletes Can Weather the COVID-19 Furlough
In times as uncertain as these, work stoppage is a concern for anyone considered nonessential. This is certainly true for those whose careers depend on full stadiums and arenas. Professional athletes are currently in a holding pattern, waiting for their seasons to start without any or limited guidance on when that will be. The NCAA canceled its March Madness tournament, MLB opening day has been postponed until further notice and the seasons of both the NBA and NHL have been suspended. Athletes and fans alike are hopeful that games will resume in 2020. But there’s a real possibility that they won’t.
For these athletes, now is the time to weigh the impacts of this ‘furloughing’ on their financial lives and what actions they can take to weather the storm. Working with their advisors, there are steps that this group can take to try to keep their long-term financial goals intact. Here are some key areas athletes should consider to help with their finances during the crisis.
For athletes who do not have a paycheck coming in, cash flow must be maintained through other means. Savvy athletes will have worked with a financial advisor to build a season’s worth of monthly spending to cover work stoppages due to salary disputes or contract trouble. This can be done by saving and investing a portion of the prior season’s earnings.
For those who have holdings allocated for short-, medium- and long-term time horizons, leaning on those assets earmarked for short-term use could potentially be a strategy to help ensure necessary cash flow.
Tap Your Influence
Sources of alternative income are often found in speaking engagements and public autograph appearances—all of which have dried up with shelter-in-place mandates. But with social media platforms receiving increased traffic, notable athletes are uniquely positioned to receive compensation as influencers.
With more and more state and local governments requesting PSAs (public service announcements) from high-profile athletes, they have a far broader platform to distribute their message and expand their brand awareness—all of which better positions them to secure social media sponsorships.
Look Out for Scams
In times like these, it’s no surprise that scams are popping up at an unprecedented rate. Incoming solicitations are nothing new for athletes, usually delivered by nefarious schemers attempting to defraud the player.
Unfortunately, the more time a player spends off the field, the more scams and solicitations they are going to receive. To help prevent losses incurred by fraud, it is critically important for the financial advisor and client to remain in close contact, review all details of cash flow and have proper protocol in place to deal with any incoming solicitation.
It’s important to remember that this is the first recession for most active players. These fresh faces have never experienced a meaningful downturn, especially one that is compounded by a global health crisis. In these stressful times, it is easy to let emotions overtake rationality in the management of one’s finances. It’s more important than ever for athletes to lean on their support networks, including not only a financial team, but family, true friends and psychological supports like a therapist.
While the future is uncertain and no one knows for sure when athletes will be back on the field, court or ice, implementing a solid financial plan to get through this time can save a player even more anguish than they are already experiencing. With proper planning, cash flow management, holistic counsel and prudent investment selection, professional athletes can focus on trying to come out on the other side of this crisis financially sound.
Sandra L. Richards is the Head of Global Sports and Entertainment at Morgan Stanley.
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