Preventing The Broke Cycle: BSO Interview with Financial Advisor Rodd Newhouse
We’ve all seen the stories. We know the statistics. 78% of NFL players are bankrupt or financially stressed within 2 years out of the game and 60% of NBA players face the same fate within 5 years. The question is how can athletes not become one of these statistics? BSO had the opportunity to interview Rodd Newhouse, a financial advisor that worked for over 15 years in the front offices of the NFL and is the founder of 44 Management, a non-financial institution that focuses on uncovering the truth and dispelling the fiction associated with the business of sports entertainment, about how athletes can avoid the financial pitfalls that often plague them.
Explain to me what you actually do at 44 Management
44 Management is a company that educates youth about the pitfalls of sports and transition.
What are the top 5 mistakes athletes make that lead to financial insecurity?
1. Not listening and not educating yourself.
2. Friends and Family.
3. Not having a plan for the transition out of sports.
4. Frivolous spending habits that come with youth and inexperience.
5. Not doing enough research on investment professionals.
What are the warning signs?
If you don’t have a plan…that’s a warning sign. Having a problem with saying no…that’s a warning sign. If you don’t understand budgeting…that’s a warning sign. When making investment decisions or choosing someone to work with, if you can’t explain what an investment professional is telling you…that’s a warning sign.
Here’s an analogy: You understand a play book. You can regurgitate the play. You listen to what the coach says after he teaches it to you, and you go out and perform it. If you’re an offensive lineman you don’t need to know exactly what the quarterback or wide receivers are doing, but you must have an understanding about what type of play is being run.
How can an athlete that has mismanaged his/her funds get back on track?
Seek wise counsel and start asking questions. You also have to take ownership of what has happened and put in place a long-term strategic plan.
Talk to me about the importance of long-term planning.
When you’re 18 it’s hard to see 22. When you’re 22 it’s hard to see 32. When you’re 32 it’s hard to see 62. Losing all of your money is not something that happens all of a sudden. It’s over spending here, picking a bad investment or advisor there, and then all of a sudden you look up and you’re asking yourself “how did I get here?” That’s where planning comes in, it helps you at 18 to prepare for 22 and at 22 to prepare for 32, that way you don’t have that “oh no” moment. A lot of little mistakes lead to big mistakes and a lot of successful steps lead to success.
If you had 1 piece of advice to offer a rookie entering into the realm of professional sports what is it?
I would ask a rookie one simple question. Would you like to live like a king today or a prince the rest of your life?
Take whatever the average salary is for a recent graduate entering the working world, let’s say $50,000, and double it. Set a budget, have a plan, and save the rest. Don’t think that you’ve struck it rich. The rookie league minimum is $390,000. $390,000 is a lot of money, but in the grand scheme of things it’s not a lot of money. I asked a rookie once, “What does $390,000 sound like to you?” He said, “Man that sounds like a million dollars.” That was my whole point. If you’ve never had it you don’t understand what it is. Stick your toe in the water and make sure you understand what it is that you’re getting into financially, and move forward with a plan on how to manage it.
What should an athlete look for in a financial advisor? What questions should they ask?
The first thing they should ask for is a copy of their FINRA report. FINRA is a corporation that performs financial regulation and has a broker check that will provide objective information about the advisor you’re considering working with.
If you had to give 1 tip on how to avoid financial hardship, what would it be?
Have a financial plan, learn it, study it, and stick to it.
People often point the finger at athletes asking how can they be broke after making such large sums of money, but it’s important to keep in mind that a large population of Americans are 1-2 missed paychecks from being homeless. Financial education is something that we can ALL benefit from. Preventing the “broke cycle” are practices we can ALL use.