5 Lessons About Building Wealth, From Basketball Titan LeBron James
Most professional athletes never reach their financial potential. Despite their outrageous incomes, they make poor financial decisions that stifle their growth and deplete their wealth.
Unfortunately, the same can be said for the average American, as well. Even when we have ample resources, many of us spend recklessly, rack up debt and invest as an afterthought, with no real vision or plan.
But, just like the real world, the world of professional sports has superheroes. And LeBron James is the brightest star of them all. Sure, he's been battling hard for a place at the table, for the Cleveland Cavaliers, in the current NBA finals (currently 2-0, in the Golden State Warriors' favor, ahead of tonight's third game). But, James's reputation is hardly tarnished by that potential loss.
The reason: Over the years, James has conquered both the sports world and the financial world through a series of smart -- no, brilliant -- moves.
These days, James is the highest -aid athlete in the NBA, yet still makes over $50 million per year in endorsements. The financial titan also penned a lifetime deal with Nike and has career earnings in the hundreds of millions of dollars.
So, sports fans or not, we can all learn a thing or two from a guy who turns visions into riches and makes other sports stars' financial antics look like child’s play.
Here are five wealth-building lessons we could all learn from LeBron James:
1. You need multiple income streams.
From the very beginning, James has cultivated too many income streams to count. From his over-the-top salary playing for NBA teams like the Cavs (reportedly over $30 million, 2016 to 2017), to his myriad endorsements with companies like Coca-Cola, Nike, Samsung, and McDonald’s, to his investments in numerous growing brands (more on that below), James has cash coming in from every angle.
While the average person will never earn millions of dollars every year like James, everyone can pursue multiple income streams. And, yes, everyone should. Think about it. Most people have one job and one employer. What happens when that income source dries up?
What, for example, do you do if you're fired or laid off? “No matter how highly paid you are, whenever someone else signs your checks, they can decide to stop paying you at any time,” Rob Wilson, a frequent CNN contributor and financial advisor, told me.
And if you don’t have other forms of income coming in, your financial situation could become bleak quickly.
“LeBron does not solely rely on income from basketball, or even endorsements,” Wilson continued. “He started a marketing and sports representation agency with his childhood friends; he's appeared in movies; he started a media company that has launched shows on Showtime [Survivor's Remorse] and NBC [The Wall] and has invested in early-stage ventures like Beats by Dre and Blaze Pizza.”
So, there's a lesson to be learned here: All of us should make sure we have a few different sources of money coming in. Have a full-time job? Start a side hustle. Or, find ways to invest your money to earn consistent, passive income.
The more income streams you have, the better off you’ll be.
2. Invest like you mean it.
According to a Gallup poll from last year, only slightly more than half of Americans own stock. But, even among those of us who do invest, most approach the endeavor with the same enthusiasm we have for a root canal.
We'll contribute a fixed percentage of our incomes to our 401(k)s, pick a few funds we barely understand and call it a day.
Unfortunately, such typical American savings strategies rarely work out well. As a recent poll from GoBankingRates showed, one-third of Americans have nothing saved for retirement and more than half have less than $10,000 saved. Yikes.
And James? It’s easy to view him through the lense of success with his endorsement deals, multiple NBA awards, and numerous championships, said financial planner Ty C. Hodges of Client Centric Wealth. But, at one point in his life, James was just a kid out on the court perfecting his game.
“This is much like investing,” said Hodges. “You don’t magically become a sports superstar or a millionaire overnight.”
Instead, you create a goal or a vision, and you work at it or save for it every day, every month, and every year.
“By investing little by little over time, you benefit from the power of compounding,” Hodges said.
3. Become the best at what you do.
It’s completely normal to dread the Monday morning alarm clock and count down the minutes -- no, seconds -- until Friday afternoon. For most people, a job is how they earn a living but not how they make a life.
But, it’s amazing what can happen when you place a relentless focus on becoming the best at your craft. Think of all the career superstars you know in the fields of real estate, banking, science and art.
Doctors who perform life-saving surgeries on tiny babies. Online entrepreneurs who create multi-million dollar businesses out of nothing. People who pull themselves out of poverty to build businesses that employ thousands of people: These people endure the same job stress as the rest of us, yet they dominate their professions as though they were born to rule. Why?
“Some people just think differently, Wilson pointed out. "They understand that they are paid in proportion to the value they create in this world -- and that the best way to add value is to become the best at what you do.”
From an early age, James established a system for everything from homework to grooming, Albuquerque financial planner Jose V. Sanchez told me. In addition to creating systems, James is a champion of healthy habits and keeping positive people around to support his goals, Sanchez said, adding: “Had he not been blessed with athletic talent, his worth ethic would have made him successful in any field.”
4. Surround yourself with the right team.
James has been surrounding himself with a team of advisors to help him oversee his financial affairs and business interests since early on. “It would be impossible for LeBron to maximize his earnings and investments without his team,” financial advisor Peter Huminski of Thorium Wealth told me.
A few years after entering the NBA, James even went out of his way to meet with Warren Buffet. “Not only did he have the meeting, but he and Buffett have become great friends over the years,” said financial planner Jude Wilson of Wilson Group Financial.
Reportedly, Buffett gave James some especially sound advice: Invest monthly, diversify broadly and believe stocks will win over time.
While not everyone has the opportunity to meet with an investing legend like Buffett, we can all benefit from building our own “teams” of qualified financial professionals.
Like James, you should know you don’t have to do it alone. And, if you want to build wealth, getting professional advice will help.
5. Plan for the long haul.
Another financial lesson we could all learn from James is the importance of thinking ahead. Most of us are thinking about this week, this month or maybe our next vacation. But, James? His financial moves tell us he’s been planning decades ahead since the beginning.
“LeBron James has displayed patience and an astute business sense in his contract negotiations by opting for shorter deals in order to maximize his long-term earning potential,” Orange County financial advisor Anthony M. Montenegro pointed out.
This disciplined approach has secured him the top earner’s position in the NBA with an annual basketball income of over $30 million. Yet, not everyone has always loved his strategy -- especially at first. “He has often been criticized by opting for shorter, more risky contracts as a player,” said personal finance expert and sports fan Trent Silver of Nerdster.com.
Given James's shorter contracts, some industry insiders have expressed worry at how an injury could cut his career -- and his earnings -- short.
Still, with the league’s salary caps constantly rising, James has actually kept the door open to bigger earnings all along. In hindsight, many of his questionable financial moves have been genius. And, what's more, his long-haul thinking extends well beyond his NBA career.
“The small forward for the Cleveland Cavaliers became one of the original investors in the Blaze Pizza chain in 2012,” said Montenegro. That pizza chain has realized substantial growth ever since.
“LeBron has also been credited with having bought a position in Beats Electronics before it was acquired by Apple,” Montenegro said. And that deal alone netted him millions of dollars.
One caveat, though: All of that success wouldn’t have been possible if James hadn’t been thinking ahead -- a talent he is finally being acknowledged for.
The bottom line
You don’t need to earn a pro athlete’s salary to build wealth, but you may benefit handsomely if you follow some of James's cues. Another thing: The most important lesson of all might be how James never limited himself or the scope of his ideas. “He’s switched employers when work conditions were less than ideal, he’s drowned out countless criticisms and he overcame a 3-1 deficit in the 2016 finals when the odds were stacked against him,” said financial planner Morgan Ranstrom of Trailhead Planners.
When you combine those moves with the context of our own financial lives, there are lessons everyone can learn.
At work, we need to know when to walk away from a job that is stunting our growth, to seek challenges and financial success elsewhere. We also need the ability to drown out the countless pundits and opinions in the media and confidently stick to our long-term financial plan and our own definitions of success.
“Never stop betting on yourself and your capacity to overcome obstacles,” said Ranstrom.
Cultivate the heart of a champion, and the riches will come.