When a professional athlete signs on the dotted line, it’s not as though they need never worry about money again. Sports Illustrated reported in 2009 that 78% of former NFL players are bankrupt or under financial stress within two years of retiring, and 60% of former NBA players are broke within five years of leaving the court. Short careers, bad investments, health problems and more can drain even the biggest bank account after the games are over.
Running counter to all that is Eric Sogard, the bespectacled second baseman for the Oakland A’s, who over the winter finished second in an online poll of fans for the #FaceofMLB—besting the likes of former league MVP Buster Posey. Sogard works closely with a financial planner, and on the eve of the 2014 major league baseball season he spoke to NerdWallet about three steps he’s taking today to secure his future—steps the average fan should consider taking as well.
1. Plan for when there’s no income.
“You have guys who see this money in their account and they’re going to go out and buy whatever they want,” Sogard says. ”I’ve heard stories of guys going out, their first year in the big leagues, and buying a car and then a house in the offseason. You’re not going to be playing this game forever—you could stop playing this game in the next year, and you’re hit with all this debt.”
And it’s not just over a lifetime. The baseball season runs from April to October—and so, too, do the players’ paychecks.
“We only have an income for six months, so you really have to be smart and save up for that offseason,” Sogard says. “If you’re going to go spend all the money you make during the season, you’re going to be stuck in the offseason, thinking of what you have to do for money because you blew it all.”
For the fans: Set aside at least six months’ living expenses in an emergency fund. If you unexpectedly lose your job, or become sick or injured, you’ll want to avoid falling into debt.
2. Set and keep to a budget.
Sogard’s agency, Octagon, provides athletes the services of an in-house financial services team, OFS Wealth, and Sogard takes full advantage of this offering. “Once I got up to the big leagues, started making more money, it’s nice to have someone to help you keep track of it, really set a budget—because when you see that money in there, you think you can buy things here and there and feel like they’re not going to leave a dent or anything, but in the long run you’re going to have to plan and save up.”
Sogard and his financial planner, Brett Dimas, meet two or three times a year to go over Sogard’s spending and his goals for the future. They itemize expenses, and if things don’t look in line with the budget they’ve set, they’ll adjust. And every year they do a review—looking at the overall financial plan and making sure Sogard’s net worth is growing at an appropriate rate.
Dimas says Sogard pretty well hews to the notion of living within his means. But Sogard concedes, “There’s still been a couple times, though, when we’ve sat down and I didn’t realize we were spending that much on a monthly basis, and it just kind of opens my eyes and my wife’s eyes that we didn’t think we were going too crazy, but there’s probably some place where we could cut back.”
For the fans: Always live within your means, and keep a close eye on expenses. Checking in occasionally with a financial planner might make sense if you don’t have the time, or the tools, to tackle this on your own.
3. Make your assets work for you.
The first thing Sogard bought after he signed his contract was a house in his native Arizona. “I took a good chunk of my signing bonus and just paid that house off immediately. And it’s been a great decision: I’ve been able to rent it out since then, and it’s been a cash flow coming in, which has been great. As I look back on it now, that’s the smartest thing I’ve done.”
He’s not alone in this among ballplayers. Sogard says some of his teammates also make the most of their real estate investments. Depending on how long they’ve been playing and for how many teams in different cities, they may own six or seven properties, and “they’re definitely making money off it,” Sogard says.
For the fans: If you’re ready to invest, consider assets that provide long-term cash flow. Options like rental real estate and dividend-paying stocks can provide income throughout retirement.
If you’ve ever had a question for a financial advisor, or could use a little help with your own budgeting decisions, head on over to NerdWallet’s Ask an Advisor platform, where you can get free professional advice.
Also, be sure to follow Eric’s adventures throughout the season on Twitter @EricSogard.
Illustration by Brian Yee.