WEALTH BUILDING ADVICE FROM SELLING LA
Even Millionaires Need a Budget
“More than 200 college students will get a chance to become instant millionaires when the NFL holds its draft ….But fast forward 20, 10 or just 5 years down the road, and many of this year’s crop of NFL rookies, like players before them, could end up broke.” By Russ Wiles, in USA Today, Sports
Instant millionaires are targets of unscrupulous financial advisers, extravagant overspending and yes…. financial ruin. According to the NBA, an estimated 60 percent of professional basketball players go bankrupt within five years after leaving the sport.
Learn Wealth Building from a Basketball Agent
Selling LA an HGTV hit television program, profiles high earning Los Angeles realtors as they broker fancy Los Angeles homes. On the show most of the properties are priced north of $1 million with quite a few hitting the $10 million mark and beyond. The episode begins with the uninterested basketball player looking at homes in the range of six to seven million dollars.
The basketball player’s mind was elsewhere and he had no interest in looking for a home.
The next scene showcased his business manager previewing properties on the players behalf.
The irate business manager asked who set the six to seven million dollar price range? Before the realtor could answer, the business manager stated matter of factly stated that his money has to last his entire life and under no circumstances is this player buying a home for that price. He admonished the realtor to scale back his search to the one to two million dollar range.
How to Make Your Money Last; Action Tips
Over your lifetime you will earn millions of dollars. You’ll probably earn those millions over decades, unlike pro athletes who earn their millions within a short time period. Either way, the money you earn, or as it’s referred to today, human capital, usually outweighs any money you’ll earn from saving and investing. Professional athletes and regular men and women need to make their earnings last their entire lifetimes.
The HGTV basketball player’s manager understood this concept and was adamant that his client was not spending all his current earnings on a 7 million dollar home, when the player could be out of a job in five to ten years. This is the type of thinking to have! The problem is that no one knows how long they will live or how much money they’ll earn. Thus, this is a problem without a clear cut solution.
1. Start Now-Create a plan to save and invest as soon as you have income. The earlier you begin investing, the longer your money has time to grow. When you are in your 20’2 and 30’s you have many earning years ahead. Don’t be afraid to put a lot of money in stock investments with the possibility of producing higher returns.
2. Keep a balanced attitude-With so many unknowns, you need to spend to live and enjoy life. Create a budget based on your current income and future goals. But, make sure that budget includes room for fun as well as saving. Avoid living extravagantly or miserly, neither style creates long term well-being.
3. Embrace the uncertainty by developing smart spending habits-The unknown amount of total lifetime income means, that the more you save now, the more you will have later when your income declines. Develop conservative spending habits and use the difference to grow your future wealth. Small changes, lead to long term gain. Do not buy a lottery ticket, that’s throwing money down the toilet. Avoid expensive habits like smoking. Buy a more modest home or car and have thousands more to spend on vacations, retirement, and your kid’s college expenses.
How do you figure out how much to spend today and how much to put towards later?
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