Advisory Column: Handle your money-rush with patience
Pablo S. Torre notes in his article 'How (and why) Athletes go Broke' published in the August 17, 2009 edition of the Sports Illustrated Magazine, that after two years of retirement, 78 per cent of NFL players go bankrupt.
Additionally, in the NBA, after five years of withdrawal from the league, an estimated 60 per cent of players go broke.
Money earned or gained over a relatively short time has a tendency to disappear as fast as it comes. Among those into whose hands it comes are sports persons, musicians, some investors and the beneficiaries of inheritances.
To a lesser extent, persons who receive redundancy payments and retroactive pay may find themselves in a similar situation. And we should not forget those who are awarded monetary settlements by the courts.
In many instances, the beneficiaries are not prepared for their good fortune. This lack of preparation and limited financial literacy contribute significantly to the loss of all or most of such financial resources.
The suggestions which follow can be of value, not only to persons who realise very significant gains but also to persons who realise relatively smaller gains which are generally above the level of financial resources which normally come into their hands.
Do not rush. Take time to assess the new situation and study its implications. Remember that even financial resources are not inexhaustible. Take time to plan carefully and to establish clear goals. As much as possible, involve the rest of the immediate family. If there are debts, consider seriously reducing or eliminating them.
Get good advice from competent professionals. If necessary, select a team of professionals but, considering that professionals work for pay, avoid going overboard with professional fees. The team approach makes sense in light of the fact that different types of issues require attention by professionals with different skill sets and competencies.
Educate yourself. Learn as much as you can about financial matters. This will help as you engage professionals, but it will come in handy before that and will give some help as you decide who you should engage. Then, as you discuss your situation with them, you should be able to make more sense of what takes place in your consultations.
Bear in mind that there is a tomorrow, which can extend to many years ahead. Plan to let what you have last a very long time. It is tempting to want to address all of today's and yesterday's needs, but sober thinking may help you realise that some of these are not needs but wants.
You do not have to let the world know by your new lifestyle that good things have happened to you. In fact, you do not necessarily need to change your lifestyle. If changes must be made, they do not have to be sudden; take time to phase them in so the changes can be less conspicuous.
Avoid consumerism. Instead, spend your money such that it will grow with time. Your goal should be to grow your resources, not deplete them. A more measured approach to life could help to preserve your life and protect you from an exponential growth of friends.
Avoid the debt trap. Manage your resources such that you will not find reason to borrow to sustain your new lifestyle.
An emergency fund is not just for persons with limited financial resources. Even with the best planning, situations you do not anticipate will present themselves in a flash. You can only respond to them effectively if you have the required resources in a form that allows you ready access to them.
Coming upon more money than usual, particularly if it happens suddenly, can be destabilising. The overall goal should be to strengthen your financial position over an extended period. This requires patience and focus.
Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of 'The Handbook of Personal Financial Planning', offers personal financial planning advice and counsel.