Don Budd seems to be a decent and respectable entrepreneur, but professional athletes should still try to avoid doing business with him.
The Kansas City-based business owner was the subject of a recent article in The Washington Post, which focused on the notoriety he has gained among athletes in particular. Budd owns a pawn shop, but he runs a side line in helping current or, more often, former athletes who have fallen on hard times and exhausted their other resources.
His collection currently includes “several hundred” championship rings, as well as the Lombardi Trophy from Super Bowl XXIX. Part of the reason Budd has such a booming business despite his unglamorous location and line of work is that he maintains an ironclad policy of anonymity on both ends of the transaction: He won’t share the names of his customers as long as they are alive, and will not sell their memorabilia unless the buyers agree to maintain that secrecy.
Before it comes to that, however, Budd offers athletes a generous period to redeem their pawned items, giving them every chance to buy them back because of the sentimental value involved. Budd displays great respect for his athlete-clients’ achievements on the field and demonstrates sensitivity to their misfortunes off of it.
It is comforting to know that there is someone like Don Budd to whom athletes can turn if they are desperate for cash, but Budd would be the first to acknowledge that his services are a last resort. After all, these are people who once were rich, or at least people who thought they were. With good planning they ought never to have needed Budd’s services in the first place. Very few athletes are financial wizards; too often, they fail to master even the fundamentals of money management. But athletes need only follow a few simple principles to stay out of financial trouble - and stay away from Budd’s pawn shop. To avoid sorrow later, here are a few rules that athletes and other young, highly paid celebrities can follow right now.
Keep spending in check and save as much as possible. There is no need to live like a monk, but these two principles are fundamental. An athlete’s earning power is front-loaded. Many can earn enough to support themselves for years, but not if they spend everything they make as soon as they make it. It is vital to save money for the relatively lean years that follow a professional sports career. A healthy savings cushion can also prove critical if injury or other misfortune cuts playing days short unexpectedly.
Be prepared for taxes. Athletes must remember that their income is subject to taxes. In many cases, such as endorsement deals, those taxes may not be withheld up front. So when an athlete spends most of the money as soon as it comes in, he or she may be stuck with a large tax debt and no way to pay it. Active players may also face an array of state tax concerns from a season’s worth of away games.
Complicated tax situations have famously tripped up many athletes, including baseball’s Darryl Strawberry and Pete Rose, and football’s Lawrence Taylor. It is essential to secure trustworthy advice as early as possible, and set aside enough to give Uncle Sam his due promptly.
Diversify. The most successful athletes could not possibly consume all the money they earned on the field simply by spending it. But they can certainly waste it on ill-considered investments, particularly those suggested by so-called friends who disappear as soon as the money does. Athletes should use only a relatively small part of their portfolio for concentrated or nonpublic investments and keep the bulk of their wealth in diversified and liquid stocks, bonds, bank accounts and mutual funds.
This is not to say that any attempt to start or sustain a business concern is foolish. Some former athletes do take the time and trouble to educate themselves about their business ventures. They choose their partners wisely, stay abreast of what is happening and generally act like owners, rather than passive investors. Athletes who use a relatively small portion of their initial earnings as seed capital to try and grow it into one or more businesses can reap many benefits from doing so. This, presumably, is the goal of NBA star Carmelo Anthony, who announced this week that he is forming his own fund to invest in tech startups. But no one should ever invest so much on any one venture that the loss of the principal would cause serious financial trouble.
Keep working. Most professional athletes whose on-field career is over will never again draw seven-, eight- or nine-figure deals, but many have parlayed their skills, knowledge and celebrity into continuing income streams. Some may become entertainers, commentators, coaches, managers or part of a team’s front office. Not only do such secondary careers keep athletes busy and engaged, but they can help keep their finances healthy too. Athletes who are able to live off of a current income stream after their on-field careers end can give their savings ample time to grow and compound to comfortably support a true retirement later in life.
I expect Budd would be very happy not to do business with athletes who follow these tips. He will do just fine without one more championship ring in his display case, and he seems to have the athletes’ best interests at heart.
Posted by Larry M. Elkin, CPA, CFP®
photo by Austin Kirk
Don Budd seems to be a decent and respectable entrepreneur, but professional athletes should still try to avoid doing business with him.
The Kansas City-based business owner was the subject of a recent article in The Washington Post, which focused on the notoriety he has gained among athletes in particular. Budd owns a pawn shop, but he runs a side line in helping current or, more often, former athletes who have fallen on hard times and exhausted their other resources.
His collection currently includes “several hundred” championship rings, as well as the Lombardi Trophy from Super Bowl XXIX. Part of the reason Budd has such a booming business despite his unglamorous location and line of work is that he maintains an ironclad policy of anonymity on both ends of the transaction: He won’t share the names of his customers as long as they are alive, and will not sell their memorabilia unless the buyers agree to maintain that secrecy.
Before it comes to that, however, Budd offers athletes a generous period to redeem their pawned items, giving them every chance to buy them back because of the sentimental value involved. Budd displays great respect for his athlete-clients’ achievements on the field and demonstrates sensitivity to their misfortunes off of it.
It is comforting to know that there is someone like Don Budd to whom athletes can turn if they are desperate for cash, but Budd would be the first to acknowledge that his services are a last resort. After all, these are people who once were rich, or at least people who thought they were. With good planning they ought never to have needed Budd’s services in the first place. Very few athletes are financial wizards; too often, they fail to master even the fundamentals of money management. But athletes need only follow a few simple principles to stay out of financial trouble - and stay away from Budd’s pawn shop. To avoid sorrow later, here are a few rules that athletes and other young, highly paid celebrities can follow right now.
Keep spending in check and save as much as possible. There is no need to live like a monk, but these two principles are fundamental. An athlete’s earning power is front-loaded. Many can earn enough to support themselves for years, but not if they spend everything they make as soon as they make it. It is vital to save money for the relatively lean years that follow a professional sports career. A healthy savings cushion can also prove critical if injury or other misfortune cuts playing days short unexpectedly.
Be prepared for taxes. Athletes must remember that their income is subject to taxes. In many cases, such as endorsement deals, those taxes may not be withheld up front. So when an athlete spends most of the money as soon as it comes in, he or she may be stuck with a large tax debt and no way to pay it. Active players may also face an array of state tax concerns from a season’s worth of away games.
Complicated tax situations have famously tripped up many athletes, including baseball’s Darryl Strawberry and Pete Rose, and football’s Lawrence Taylor. It is essential to secure trustworthy advice as early as possible, and set aside enough to give Uncle Sam his due promptly.
Diversify. The most successful athletes could not possibly consume all the money they earned on the field simply by spending it. But they can certainly waste it on ill-considered investments, particularly those suggested by so-called friends who disappear as soon as the money does. Athletes should use only a relatively small part of their portfolio for concentrated or nonpublic investments and keep the bulk of their wealth in diversified and liquid stocks, bonds, bank accounts and mutual funds.
This is not to say that any attempt to start or sustain a business concern is foolish. Some former athletes do take the time and trouble to educate themselves about their business ventures. They choose their partners wisely, stay abreast of what is happening and generally act like owners, rather than passive investors. Athletes who use a relatively small portion of their initial earnings as seed capital to try and grow it into one or more businesses can reap many benefits from doing so. This, presumably, is the goal of NBA star Carmelo Anthony, who announced this week that he is forming his own fund to invest in tech startups. But no one should ever invest so much on any one venture that the loss of the principal would cause serious financial trouble.
Keep working. Most professional athletes whose on-field career is over will never again draw seven-, eight- or nine-figure deals, but many have parlayed their skills, knowledge and celebrity into continuing income streams. Some may become entertainers, commentators, coaches, managers or part of a team’s front office. Not only do such secondary careers keep athletes busy and engaged, but they can help keep their finances healthy too. Athletes who are able to live off of a current income stream after their on-field careers end can give their savings ample time to grow and compound to comfortably support a true retirement later in life.
I expect Budd would be very happy not to do business with athletes who follow these tips. He will do just fine without one more championship ring in his display case, and he seems to have the athletes’ best interests at heart.
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