5 Financial Mistakes Athletes Make

The financial statistics on professional athletes are well known: 78% of NFL players experience financial stress within two years of retirement. 60% of NBA players face serious financial difficulty within five years.

But the story behind those numbers isn’t what most people think. It’s not reckless spending. It’s not a lack of intelligence. In most cases, it’s five specific mistakes that could have been avoided with the right plan and the right team.

(And How to Avoid Them)

Mistake 1: Hiring an Advisor Who Earns Commissions

The athlete wealth management industry has a long history of conflicts of interest. Advisors who earn commissions have an incentive to sell you products (insurance policies, annuities, private placements) that may not be in your best interest.

The fix: Work with a fee-based fiduciary. A fiduciary is legally required to act in your best interest. At Paragon, we don’t sell products. We don’t earn commissions. Our only incentive is to grow and protect your wealth.

Mistake 3: Investing Before Building a Foundation

The pitches start the day you sign. Real estate deals, restaurants, tech startups, a friend’s clothing line. Some of these opportunities are real. Many are not.

The fix: Build your core investment portfolio first. Establish your emergency fund, your tax reserves, and your long-term investment plan. Then, and only then, consider alternative investments with money you can afford to lose.

Mistake 5: No Estate Plan

Most athletes don’t think about estate planning in their 20s or 30s. But without proper trust structures, beneficiary designations, and asset protection, everything you’ve built is exposed: to lawsuits, to creditors, to a probate process that’s public and expensive.

The fix: Work with an estate attorney to establish trusts and asset protection structures early. Tennessee’s trust laws are among the strongest in the country. Don’t wait until you need protection to build it.

Mistake 2: Ignoring Taxes Until April

Athletes have one of the most complex tax situations of any individual taxpayer. Multi-state filing, signing bonus taxation, endorsement income, deferred compensation. The list goes on. When athletes treat taxes as something to figure out in April, they miss planning opportunities that could have saved them real money.

The fix: Integrate tax planning into your investment strategy from day one. At Paragon, tax preparation through Paragon Tax is part of the same relationship as investment management. Your advisor and your tax preparer are on the same team.

Mistake 4: Living Like the Contract Lasts Forever

A five-year, $15 million contract sounds like a lot of money. After taxes, agent fees, and training costs, the take-home might be $7-8 million. Spread over a 50-year retirement, that’s $140,000-$160,000 per year before investment returns. Not a lot when your lifestyle was built for $3 million a year.

The fix: Build a spending plan around what you actually keep, not the headline number. Know your real take-home. Plan for a 50-year retirement, not a 5-year contract.

The Common Thread

All five mistakes come down to the same thing: not building a plan early enough, with the right people. The athletes who avoid these mistakes aren’t smarter or luckier. They just started planning sooner.

If any of this sounds familiar, let’s talk. No obligation.

Schedule a conversation with Orleans Darkwa

FAQ

  • A fiduciary is legally required to act in your best interest. Fee-based means the advisor is compensated by a percentage of assets managed, not commissions from selling products.

  • Ask two questions: How are you compensated? And are you a fiduciary? If they earn commissions or they’re not a fiduciary, their incentives may not align with yours.

  • Build your team: a fiduciary financial advisor, a CPA who understands athlete taxes, and an estate attorney. Then set aside 30-35% for taxes, establish an emergency fund, and build your core investment portfolio.

  • A rough estimate is about 50% after federal and state taxes, agent fees, and training costs. The actual number depends on your state of residence, contract structure, and tax planning.

  • Without trusts and asset protection, your wealth is exposed to lawsuits, creditors, and public probate. Building protection early costs far less than defending against a claim later.