There’s nothing quite like success on a big stage.
For athletes, Oscar winners, platinum album sellers and dynamic entrepeneurs, the media attention and the adulation of fans, friends and family can be intoxicating. The high can go on and on.
But before the victory lap is over, it’s already time to make plans for the next triumph – both professionally and personally. More importantly, it’s time to make the most of the rewards of your success.
Here are five smart moves for turning sudden wealth into generational wealth:
1) Find your rhythm with money.
The professional athlete knows within his/her craft that the key to a great golf swing, jump shot, tackle or pitch is to establish balance. Balance helps you find rhythm, consistency, strength and power. When watching another great athlete on television demonstrate their craft, balance is what makes them appear that they are succeeding with very limited effort. The term can be defined as a harmonious arrangement.
Let me take a step back quickly and ask you: are you as balanced off the court, the field, the course, as you are on it?
Establish your rhythm by defining the next milestone in your life and utilize that as your reference point for success. Understanding what budget will be needed to reach that milestone will inform your decision on the type of car you can drive, house you can buy, and lifestyle you can live.
Define the percentage of money you can live off of. If you don’t define it, your lifestyle will do it for you.
Seek professional help. You trust your agent and the team that got you here. Managing wealth likely isn’t an area of expertise, but they can provide a referral. Don’t sign anything, but do listen. There’s plenty of time to build a long-term relationship later.
With a little patience and discipline, you likely can buy everything on that wish list. But if you do it all today, you may become another cliché – the penniless star.
2) Learn to say maybe.
Fame and fortune make you a magnet. Don’t fight it. Embrace it, but understand the pitfalls.
Some people you know will come seeking your investment in their hot new idea. Solicitations come left and right. You want to help and be involved. You don’t want to say no. The good news is you don’t have to.
If a pitch sounds plausible, ask them to write down the specifics and send them to your financial advisor for evaluation. In my experience, more than 80 percent won’t follow through. From that other 20 percent, if there’s a diamond in the rough, your advisor can help you evaluate the possibility.
3) Recognize that today’s payday is no guarantee of future earnings.
Athletes recognize that career-ending injury is always lurking. But the same self-confidence that fuels their on-field performance tells them a serious injury won’t happen to them.
An actor whose latest film underperforms in the box office will find future earnings diminished. It happens in every field. Financial advisors can factor in career risks when building a plan.
Categorize your money into at least three accounts that have specific roles. Your first account should be dedicated to ensure you have enough cash on hand to support your annual lifestyle. Your second account should be dedicated to growth on your money, but constantly re-evaluated from a risk/return perspective. After setting up your lifestyle account and your growth account you’ve reserved your right to open the DREAM account.
You may use that account to explore your entrepenurial spirits, acquiring second and third homes, investing in higher risk illiquid deals. Don’t fill your dream account first, fill it last.
4) Learn the difference between being rich and living richly.
There are many definitions of personal wealth and the right answer needs to be uniquely personal. Wealth certainly includes real estate and investments, but it also may include standing in the community, contributions to society or progress toward resolving an issue or cause. There’s an old saying: ‘For those to whom much is given, much is expected.’
Many wealthy individuals have achieved the pinnacle of success in their chosen field. And the financial rewards could fuel a very long personal party. But it also could assure that the entire family – this generation and the next – would have every opportunity to succeed in their chosen fields.
It can also fund contributions to making society better. We counsel our clients to set a big picture budget that sets aside a fixed percentage for giving back in support of causes of their choice.
That’s generational wealth and it’s within the grasp of more people today than ever before.
5) Audition a team of specialists to be your advisors. Life is a team sport. This is your chance to select who gets on your bus. A tax specialist can find the best route through the tangle of IRS regulations. Legal and insurance pros can insulate you from harm. An investment expert can grow your money. Look for credentials. Explore past results, but recognize past results don’t assure future returns. And once you find people you trust, follow that advice.
Joe McLean, a former pro basketball player, is co-founder and managing partner of Intersect Capital LLC, a wealth management firm in San Ramon, Calif. His clients include athletes, members of the entertainment community and business executives. For more information, contact firstname.lastname@example.org.