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.

Subscribe to Enough Wealth. Copyright 2006-2008

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Wealth benchmarks(TM) has a website (Australia and International versions available) that lets you create a free account and complete a detailed, anonymous financial survey and obtain a personalised and confidential report about various aspects of "what you own, owe, are worth, earn, spend, save and insure". It is based on your inputs and the application of various simplifying assumptions, so it provides a fairly high-level summary, but it's a good starting point to help you better understand your position and hint at possible priorities for improving or enjoying your financial security.

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Chinese Wealth

I recently attended a 'careers night' hosted by AMP Financial Services (I'm thinking about applying for their 13-week intensive training to become a financial planner once I've completed the DFS(FP) course. Then again, quitting my salaried position to start my own financial planning business as an AMP franchisee would be a big step, which I haven't decided to take as yet). Anyhow, one of the facts they mentioned about financial planning in Australia is that although Australia is only a tiny fraction of the population of Asia, we represent around 40% of the private retirement savings of Asia. And the Australian retirement savings pool is growing at a rate of around 14%pa (largely due to our compulsory superannuation system) compared to GDP growth of around 4%.

However, this pales into insignificance compared to the rate of growth in wealth management in China. After many years of double-digit GDP growth, and probably more to come in the near-term, the Chinese wealth management industry grew by an amazing 70% in 2007. Although China can be a tough market for western companies to penetrate, there is huge potential for Australian wealth management companies to leverage their existing expertise into this growing market. A JV with an existing Chinese bank or investment company would probably be a good approach, given the risks in investing large amounts of capital to create a local presence from scratch - especially if there is a crash in the Chinese stock market in the next year or two and the grow in wealth management temporarily reverses.

Copyright Enough Wealth 2007