When I think of the finances of professional athletes, I mostly think of the bankruptcies that occur. Occasionally though, incredible stories shine through. When I look at what Lebron James has done on and off the court, I am always astounded. On the court, Lebron James is the best player currently playing in the NBA. Getting triple doubles seems to be almost a given when he wants it. Off the court, his partnerships with Nike, McDonalds, and other corporations will net him hundreds of millions if not billions of dollars.
What isn’t looked at enough though is his financial savvy.
When I was catching up on the news a couple days ago, an article popped up on how Lebron James spends his money. One of the most important points was how Lebron spends 1.5 million dollars to take care of his body. As the article noted, that investment is incredibly important to his continued performance. By spending what seems like a ridiculous amount of money on his body, Lebron has ensured he can make hundreds of millions of more dollars. The lesson there is never harped on, but needs to. Sometimes, saving a few pennies costs you incredibly more money in the long run.
A Case Study: Lottery Winners
When I talk to a lot of people, many say the only way that they will get wealthy is winning the lottery. When asked what they would do, you know the answer. Fancy houses, hot dates, European cars, the works. The picture is beautiful, but everyone knows many stories of what happens next. Some winners squander it, and have to return to minimum wage jobs. Others are the victims of scams. Some, unfortunately, end up murdered. Apply the lesson from Lebron James. Spend a few pennies to save exponentially more.
When someone wins the lottery, they HAVE to make immediate contact with two people. An attorney at a reputable firm, and a wealth manager at a firm that services high net worth clients. That team will charge the lottery winner percentages of assets, and many winners will scoff. That is a TERRIBLE mistake. That team will ensure your privacy to the extent that your state’s laws allow. They will set up limited liability companies to help make sure people can’t ram their cars into yours on the streets and then try to sue you for their stupidity. They will set up trust funds so that your children don’t repeat the experiences of the family that ran Johnson and Johnson. Trust me, you don’t want to die knowing your children are living in a culture with allegations of rape and incest, and knowing you could have done something to prevent it. By spending 1.5 million dollars a year, a person who wins a hundred million dollars will have a much more secure and happier life.
Let’s Tie This to Something more Relatable
It’s fine and dandy to write about hypothetical lottery winners, but let’s turn this to more common situations. When you look at folks who generate high amounts of wealth relative to their incomes, engineers come near the top of the list. This occurs because rather than focusing on sticker price, engineers tend to look at life cycle costs. As some of the better financial writers have noted, engineers tend to focus on “cost per use.” The most common example I see on the internet is the use of Edmund Allen shoes. A lot of people see the $600 and promptly turn it down saying they can’t afford it. What isn’t added to the equation is that those shoes last a lifetime because people can return the shoes and get them repaired for next to nothing. Eventually the “cost per wear” of these shoes falls below a ton of other shoes due to the other shoes falling apart after a year and having to be replaced. When you start to think of the things you buy in this regard, your worldview changes. Rather than buying flimsy knick-knacks, you pay up a bit for quality that lasts a longer time, and in that long run, saves you money that you can invest to build your personal balance sheet.
While not all of us are going to be billionaire athletes, we can learn lessons from the intelligent behavior that some of them exhibit. In Lebron James’ case, there are multiple, but one of the most important is not to be afraid to pay money for services or products that in the long run give us far more cash deposited in the bank.