Sunday 31 May 2009

Another tale of financial woe from a retired sports star

In yet another example that being a successful sports star doesn't mean you'll be set for life, Australian tennis star Mark Philippoussis (nick-named 'the scud' for his fast service), is at risk of losing the bay-side Melbourne house he shares with his mother after falling behind on the mortgage payments. One has to wonder why he would even have a $1.3 million mortgage, since the retired 32-year-old Davis Cup player earned more than $8 million on the court and millions more in sponsorships. His comments reveal that, like many young sports stars, he had acted as if his income during the peak earning years would last forever:

"Money came in left, right and centre; you just thought that's how it was for everyone and that's how it will always be," he said.

Perhaps the fundamental financial rule for such high-income, short working-life, sport stars should be "spend less than you'll earn ON AVERAGE during you lifetime". Saving 10% of a million dollar annual income could give a false sense of fiscal responsibility if you can only earn that much until you turn 30. Spending $900K per annum is profligate if you average annual income until 65 will be a much more modest $200K a year.

For us mere mortals, the lesson to take on board is that you can't count on your current income level lasting until retirement. Quite a large proportion of worker's will suffer long periods of un-employment or ill health - so we should ensure our financial plans allow for such set-backs, and include adequate amounts of insurance for illness, disability or loss of income.

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Penny in Australia said...

I read that too. It just astounds me that people can be so dumb. I guess I've always been ultra frugal and the thought of spending beyond my means is really inconceivable to me.

But really, you would think that knowing that the money is going to stop when you're about 30 (when most elite athletes retire) would make you take stock? I mean, I can almost understand the average Joe thinking that he'll never lose his job, but athletes like Mark Philippousis are aware that their playing time frame is strictly limited, surely?

And if Mark'd just been a bit nicer, rather than being the angsty, aggro, nasty pastie he usually was, he'd have a lot more money from endorsements too. Pat Rafter is proof of that.

Wealth Journey said...

Looks like there is a market for financial planner and private bankers afterall.

Some help from those people are better than no help if the stars are clueless about money.