Professional athletes Isaiah Thomas and Dexter Fowler talk about prime cash ideas

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HUNTINGTON BEACH, Calif. – Professional athletes face a difficult task early in their careers – learning to manage large sums of money as they rise to stardom, often at a young age.

Isaiah Thomas, an all-star basketball player, and major league baseball player Dexter Fowler sat down with CNBC at the Future Proof Wealth Festival to talk about the money lessons they’ve learned throughout their careers. Financial advisor Joe McLean, who works with Fowler and Thomas, also shared advice from working with wealthy athletes like NBA star Klay Thompson and pro golfer Sergio Garcia.

Here are six of their top money tips.

1. Save more than you spend

Isaiah Thomas during the 2016 NBA All-Star Game.

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“When I got money when my professional career started, the most important thing I learned was learn how to save,” said Thomas, 33, a point guard who is currently a free agent. He has played for many teams over his decade-long career and was a two-time NBA All-Star during a stint with the Boston Celtics from 2014-2017.

When his first paychecks came in, Thomas and McLean set parameters: 70% of every net dollar was allocated to a savings pot. This made saving automatic, said McLean, founder and CEO of San Ramon, Calif.-based Intersect Capital, which was ranked 94th on the 2021 CNBC Top 100 Financial Advisors list.

“Saving more than you spend was our philosophy every month,” Thomas said.

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The percentage saved can change depending on the athlete and the stage in their career, McLean said. It could be 40% on a player’s first contract, 60% to 70% on their second and 80% on their third and beyond because “cash flow is so high at this point,” McLean said.

This approach helps players choose the lifestyle they want to live “before your lifestyle chooses it for you,” he added.

“You have to make the decision from the start” to build a habit, he said.

2. “Always prepare for rainy days”

“Always prepare for rainy days,” said Fowler, 36, an outfielder who won a World Series with the Chicago Cubs in 2016. He is currently a free agent.

“You never know what’s going to happen,” he added. “You [could] get into a car accident; you could stop working.

“Hope for the best, but prepare for the worst.”

Dexter Fowler during game seven of the 2016 World Series.

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Fowler describes himself as a lifelong savior. As a young boy, he kept family members’ physical birthday checks because he didn’t know they needed to be cashed.

“People live in the moment,” he added. “Don’t get me wrong, got your vice.

“I like watches; that’s my vice, but I don’t have 10 vices,” Fowler said. “This is how you go crazy; you will spend money, but spend it right.”

3. Think about the financial implications

For people who make significant amounts of money, there are no immediate consequences of bad financial decisions, McLean said.

“You may have a big Amex bill, [you’re] swipe, make some big purchases, but because money is still coming in, the card still works,” he said. “You don’t feel it.”

As McLean explains, “The laws of finance don’t obey the laws of physics.”

This is what happens in sports: you save a lot of money, but you have a great lifestyle and you don’t let it get worse.

Joe McLean

Founder and CEO of Intersect Capital

“If you walk over a log, you have to watch where you’re going, and if you take your eyes off it, you’ll fall in the water,” he said. “If you lose sight of your money, if you make a lot of money, nothing happens.”

Until the money runs out, that is.

“A lot of athletes think it’s never going to stop or it’s never going to end,” Fowler said Tuesday during a Q&A session at Future Proof. “But it does.”

4. “Live like you’re already retired”

“Live like you’re already retired,” Fowler told CNBC.

The thought is: If you overspend during your working years, it’s difficult to transition to a more frugal lifestyle later – which may be necessary for someone who doesn’t have the nest egg to fund lavish expenses.

With that mindset, “you don’t have to change your lifestyle once you’re retired,” Fowler said.

“And it’s hard to do,” he added. “You’re in locker rooms and clubhouses… [and] You see a guy riding in a [Lamborghini].

“You think I make seven times what you do and I don’t feel like I can afford it.”

5. Earn interest on your money

Thomas and Fowler, both in their 30s, have long investment horizons — and that’s a strong thing, McLean said.

Time harnesses the power of compound interest calculated on principal plus accrued interest – meaning your investment gains accumulate faster.

“That’s what happens in sports: you save a lot of money, but you have a great lifestyle and you don’t let that get worse,” McLean said. “Let this money earn interest for another 10 years, double it again, [then another] Time it becomes a multi-generational fortune.”

In comparison, “you’re not going to allow the compounding effect” by continuing to spend big and run down a portfolio over the next decade, he said.

Fowler puts this idea into practice.

“We want to save these next 10 years,” he said of his family. “We reduced everything.”

6. Look beyond the flat rate

Fowler received a nearly $1 million signing bonus in 2004 when he was drafted by the Colorado Rockies. He was just out of high school, 18 years old and got his first contract, he said.

“You sit there and think I have $1 million?” he said. “A million dollars was a lot of money back then.”

“But $1 million doesn’t get you very far,” he added.

The same principle may apply to everyday retirees — a $1 million nest egg may sound like a plentiful sum of money to make a great living, but it may not go as far as people expect from a retirement spanning three decades or can take longer.

When Fowler received his signing bonus, he immediately wanted to buy a car. All of the newly drafted players bought Escalades and Range Rovers — so he bought a Range Rover, against the advice of his father, who recommended leasing rather than buying a car, Fowler said. (Fowler now exclusively rents his cars; he has two Teslas. Cars are “depreciations,” he explained.)

The tax has also eaten up a significant portion of his signing bonus, Fowler added. Playing minor-league ball post-draft, he then realized it’s difficult to make a living on that salary, which was earning him about $300-$400 every two weeks — making the bonus essential to get over to make ends meet.

“I’ve seen a few guys get off-season jobs,” he said. “I was lucky that I didn’t have to do that.”