7 Money Lessons from Boris Becker & Mike Tyson | My Money Sage
Tennis star Boris Becker and heavyweight boxing champion Mike Tyson have a lot in common. Becker was the youngest champion to win the men’s singles trophy at Wimbledon at the age of 17. He was also the youngest winner of a Grand Slam title in men’s singles. Tyson became the youngest heavyweight boxing champion at the age of 20. And, both of them went from riches to rags.
Becker, who is now 51 years old, was declared bankrupt in 2017, and he is now selling his trophies and medals to pay his debts. Tyson, who is now 53 years old, became bankrupt before he retired in 2003. Becker and Tyson both became bankrupt even though they earned millions and enjoyed luxurious lifestyles. However, they are not the only sports stars to face bankruptcy.
Many professional athletes run out of money after retirement. Did you know that 60% of the players of the National Basketball Association (NBA) become insolvent less than five years after they retire? And, 78% of the players of the National Football League (NFL) face financial hardship two years after they retire.Learn how to mange your money & create wealth, Download your FREE eBook now
The earnings of most professional athletes come within a brief period of a few years. Athletes spend more than they can afford on luxuries, and they try to keep up with the Joneses, which is disastrous for their finances. As their earnings grow, crooked, incompetent financial advisers exploit them. Many athletes lose their money due to financial scams and irresponsible spending.
News of the financial problems of celebrities appears regularly. Athletes fail to grasp how precarious their position is even if they have advisers. They need to take responsibility for their wealth and track the activities of their advisers. Financial advisers charge very high fees, which can eat into their wealth.
Peer pressure forces athletes to splurge on luxuries they can’t afford. They have to save enough in a brief career to last a lifetime, and this requires discipline and hard work. Those who are too trusting or careless make financial errors from which they may never recover.
Here we will look at the lessons we can learn from the stories of Boris Becker and Mike Tyson and the steps we can take to ensure that we will enjoy financial freedom throughout our lives:
Plan your finances
Set goals and save money every month for each of them. Earmark separate investments for each of your goals, and set up Systematic Investment Plans (SIPs) to invest fixed amounts every month. SIPs ensure that you will make investments before you can spend the money in your bank account. You are more likely to reach your goals because everything happens on its own without your intervention.
Be cautious about taking loans and using credit cards
Avoid taking loans to pay for luxuries that you can’t afford. Credit cards have exorbitant interest rates, so try to clear your credit card dues every month. Taking on more debt than you can afford can push you into a debt trap. If there is a sudden drop in your income, you may find it very hard to pay back your loans. Think about whether you can afford to buy a luxurious car or home.
Avoid risky investments
Watch out for risky investment proposals that promise handsome returns. If you think an offer is too good to be true, you may be right. If you can’t understand an investment, it may be best to avoid it. Read the fine print to avoid losing money by investing in dubious business ventures. Avoid investing in derivatives if you don’t understand them. Stick to mutual funds, which offer a much higher level of transparency and safety.
Start building a retirement fund early
Once you get used to an opulent lifestyle, it’s tough to adjust to a lower standard of living. That’s why it’s essential to build a retirement fund. Start investing early to ensure that your retirement fund will be large enough to support your lifestyle. If you start saving late, your retirement fund may not be large enough to provide an adequate income, and it may be too late to do anything about it.
Also Read: How to be Successful at Retirement Planning
Keep business expenses and personal expenses separate
Separate your private expenses from your business expenses. Avoid drawing money from your business to buy things for yourself. Unplanned withdrawals will hurt your finances if there is a downturn. If you have mortgaged your house to take a business loan, you could even lose it when business is down. Be cautious about providing personal guarantees for loans.
Get adequate insurance
Term insurance and medical insurance will help you to prepare for unexpected events. An accident can affect the future of your family if you don’t have insurance. The cost of medical treatment keeps going up every year, so get sufficient insurance without delay. You will have to pay a much lower premium if you buy a policy when you are young. Avoid traditional life insurance policies which combine investment with insurance. They offer inadequate coverage and low returns.
Have the right asset allocation
Your asset allocation has the most significant impact on your long-term portfolio returns. If you are investing for the long term, put more money in equities and less in debt. As the goal approaches, start moving money from equity to debt. For short-term goals, it’s best to invest in debt. Decide on the right asset allocation based on your age, time frame, risk tolerance, return expectations, and goals. Subtract your age from 100 to arrive at a suitable equity allocation for you.
The stories of Boris Becker and Mike Tyson show that it’s easy for anyone to go from millionaire to pauper. You can avoid this by saving regularly and investing in the right assets to secure your family’s future. Avoid investment schemes that seem to be too good to be true. Decide on a suitable asset allocation based on your profile. Make separate investments for specific goals. Get adequate term insurance and medical insurance when you are young. Build a retirement fund that will help you to maintain your lifestyle.