Episode 218: Financial Reality Check: Learning from Tommy Paul

Hey everybody, David Chudick here.

And have you ever thought, man, if I just made some more money, if I got rich or if I were famous or if I made millions of dollars or hundreds of thousands of dollars, all of my financial problems would go away.

Now, it is true that we do need a certain amount of money to meet our basic needs, but today I want to give some examples of where earning a lot of money, like I'm talking in the millions, has not necessarily saved some people from financial hardships.

So I hope that you enjoy this episode.

And here we go.

Welcome to the weekly Wealth Podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets.

And simply how to build true wealth.

So come on and let's enjoy this, this journey together.

Welcome to this week's episode of the weekly Wealth Podcast.

My name is David Chudick and I'm a financial advisor.

And as you know, I believe that how we handle our money should positively impact our lives and the lives of those around us.

And I really hope that this podcast can be a little piece of that puzzle in your life.

So if you know me personally, you know that well, before I was a financial advisor, I actually was a tennis pro, a teaching pro at a big resort in Myrtle Beach, South Carolina.

And that was a really cool gig and it was kind of funny.

Back in the 90s, the slogan and joke amongst the tennis pros was rack it back, bend your knees, that'll be $40, please.

And that was kind of what we did teaching tennis.

So.

But it was a really cool gig and I was never a world class tennis player, but I enjoyed it.

And a couple years ago I got back into playing tennis after a couple decades of not playing tennis and it's just a really great lifetime sport and it's something that helps to keep me in shape.

So with that being said, I was watching the Tennis Channel earlier this weekend and I heard an interview with one of the top ranking American tennis players, Tommy Paul.

And Tommy, I hope that you'll listen to the this and I would, dude, I would love to be able to hit the ball like you do.

I actually saw you play in Atlanta and I hope you don't take this as criticism and I hope that you take this as honestly as, as a compliment because I know how hard, or I can only imagine how hard a top ranking athlete needs to work to stay on top of their game.

I am certainly not a world class athlete or anything close to it, but it's hard for me to get my workouts in to stay in shape.

Then when you combine that with running a business and all of the things that I'm sure a top ranked athlete needs to do, I am sure that managing finances is a tall task.

But Tommy Paul, and this is according to Yahoo Sports, he had his F150 repoed.

So and I quote from from Yahoo Sports it was a stressful weed off court, said Tommy Paul.

His F150 was repoed from his house in Boca Raton.

Quote, ford took it back.

I'm excited to get it back, Paul said via multiple outlets.

I had to win a couple matches so I could pay it off.

Paul added the truck had provided extra motivation to make it further into the tournament.

Quote I've been grinding to get my truck back, he told reporters.

So Tommy Paul and I'm going to tell you a little bit about his career statistics and his net worth.

So according to celebritynetworth.com, tommy Paul is an American tennis player who has a net worth of $8 million and his career earnings are somewhere over the $10 million mark.

And honestly, I couldn't find any statistics on what his endorsement deals and incomes are, but I would guess it's a pretty good amount of money.

One might be tempted to say, like how is it possible that you can have a truck repoed when you've made $10 million and you're not even 30 years old yet?

And I wanted to talk a little bit about that and how things like that might happen and honestly give some grace to Tommy Paul and talk about some maybe final financial accountability topics that we all need to be thinking about.

So first of all, $10 million, right?

Well, that is a tremendous amount of money, there's no question.

But you're going to take 40 to 50% of that right away in taxes, so that becomes $5 million.

Then you're going to take agent's fees.

And then for tennis players, they're responsible for a lot of their own expenses, so the travel and everything else.

So it might seem like a tremendous amount of money, but it really, in a lot of ways, once you take big chunks off of it, it's not that much.

And then the other thing is when you are world class at your trade, can you imagine the amount of time and effort that somebody who's top 15, top 10 in the world has to put into their trade?

And if they're not careful and if they don't surro themselves with the right people, they may just end up not paying some bills as they're traveling.

Tommy Paul is actually in Italy for a tennis tournament.

And I imagine it might be pretty difficult to put yourself in a position if you're trying to do it yourself, to pay your bills and do all the things that need to be done when you're traveling around the world.

So I don't know anything really specific about Tommy Paul's finances, but.

But what I do know is I have some high earning clients myself and through some big chunks of money just leaving their lives and maybe not planning for taxes.

Yes, even with high incomes, we can get to a point where we do have some financial struggles.

So let's talk about some other athletes and celebrities who maybe ended up having some financial problems.

We all know Iron Mike Tyson.

He made over $400 million in his career, but yet he filed for bankruptcy in 2003.

Now, some people say that he had an extreme lifestyle with tigers and mansions and cars and entourages, legal issues and divorces and unchecked spending and poor financial management.

The lesson with him might be no amount of punching power beats poor planning.

Allen Iverson, he earned over $200 million in his career and he was almost broke by his mid-30s.

Now, he had lavish gifts, gambling, entourage costs, lack of budgeting.

But Reebok did set aside supposedly $30 million that he couldn't touch until age 55.

So the list goes on and on.

There are some musicians.

Let's look at MC Hammer.

He, yeah, he was too legit to quit.

And while he made $30 million in the early 1990s, he went bankrupt in 1996.

And they say that was because of overspending.

He had a staff, 200 people, $30 million, mansions and excessive luxuries.

So maybe there's some poor financial oversight, no scalable financial strategy.

And yeah, how about Nicholas Cage?

$150 million between 1996 and 2011, but with IRS liens and foreclosures, he had some wild spendings, castles, dinosaur skulls, 15 personal homes, owed the IRS millions.

And he blames his business manager.

So again, I don't know facts there, I don't know what happened.

But suffice it to say we can make a lot of money, but with big income sometimes comes big mistakes and big chunks of money coming off the top.

So let's talk about some things that we might be able to do even if we're not making 10, 20, 30, $50 million a year.

But maybe we're in the several hundred Thousand dollar range per year and maybe we just never seem to get ahead.

Let's look at some lessons and let's look at some things can do so that maybe we don't hit those rock bottom financial times in our lives.

So here's one mistake that I've seen made by people of every income level.

Now this is from people who are making low incomes all the way up to making hundreds and hundreds of thousands of dollars.

And of course we can also look at some of the extravagant spending that we've seen by celebrities.

And this is just literally when you spend every dollar that comes in, whether it's mindless spending and you going to convenience stores and spending 5, 10, 15, $20 here and there, or if you're like a celebrity who's spending millions of dollars on mansions and Lamborghinis and sports cars.

One of the things that we all need to ask ourselves is what is the appropriate amount of money that I should be spending in accordance to my financial reality?

So I've said it before, I'll never be the financial advisor that wants you to just cut, cut, cut expenses, don't have any fun, don't enjoy life, don' but what I will do is ask you, are you spending a reasonable amount of money for your financial reality?

And let's face it, some people can afford items and trips and things that other people can't afford.

So you need to be spending what's appropriate for you.

Now if you're a tennis player or an athlete or a business owner, sometimes your cash flows are not regular, which means that you don't have the same amount of money coming in every week or every two weeks like you might if you were on salary.

So just because you get an influx of revenue does not mean that you are free to spend it.

Because with uneven revenue streams comes some complexities and you have to make sure that you're always keeping some behind for if the next batch of revenue doesn't come in as soon as you want it to.

So let's make sure that we're not spending every dollar that comes in and let's be purposeful with our spending.

What about impulse spending?

Have you ever bought anything and then had buyer's remorse because you just had to have it?

And for celebrities it might be a couple hundred thousand dollars car, it could be something really expensive.

But for normal people it might be just spending $20.

It could be going through a drive through, it could be a lot of different things.

But oftentimes I've seen clients and prospects and just the population in general make impulse purchases.

And that really wasn't because they needed the item.

It was really some other coping mechanism.

I don't know if you're like me, but sometimes I just like to spend money when I'm stressed because it makes you feel like you have some control or who knows what the psychological reason is.

But when we do things for reasons that are not evident, sometimes we regret them later.

So what if you, and maybe a trusted person in your life put some rules in place for how you're going to allow yourself to spend over a certain amount of money?

So maybe if you're from married, you and your spouse will say we'll Never spend over $500 without discussing it with our, with our spouse or $1,000 or whatever that number is.

Or maybe if we want to buy something and it costs over a threshold, we'll always give us a day or two before we actually pull the trigger.

And then if we still need it or want it, then maybe it is something that we are free to buy.

So how do you manage impulse spending in your life?

I've seen impulse spending have horrible financial impact some people, and I think it's something that we need to be purposeful about.

We don't want to live limited lives.

We don't want to live lives void of experiences.

We also don't even want to live lives void of material things.

But we have to make sure that we're spending the amount of money that is appropriate for our financial reality.

And part of that means if we can eliminate some impulse spending, then we can build some more financial margin and we can spend purposefully.

Now here's a hack that you might be able to implement in your life that can help you with impulse spending.

What if you had a bank account that is like your main bank account for paying bills, but what if you only kept a relatively small amount of money in there and then you transferred your excess money, assuming that you have some excess, into an account that's a little bit more difficult to reach.

So in our house, we have a checking account and that pays our electric bill and it pays for groceries.

It pays for things like that.

And then we have a money market account that is with a brokerage company.

And yes, we can transfer money from the money market account to the brokerage account, but it takes a couple days.

It takes a a little bit of work on our part.

Our checking account balance tends to stay a little bit on the low side, but then it's out of sight, out of mind, and we tend not to spend it.

So do you have any behavioral hacks that you use to help you to manage impulse spending?

Be really interested to know.

Post them on social media, go to the weekly wealth podcast Facebook group, or email me davidarallelfinancial.com and let me know.

Do you have any behavioral hacks that help you and your family to manage impulse spending?

Now I'm busy.

You're busy.

Most people are very busy.

Pro athletes are busy, entertainers are busy.

And one of the things that I've seen quite often is that busy people, they tend to put their finances on the back burner and they actually do it for maybe a couple reasons.

Number one is they literally might be very busy.

But number two is sometimes we tend not to deal with things when we don't want to see the reality.

And number three, sometimes it might be just a question of not knowing what to do.

There are people who just don't understand money and don't understand the financial decisions that they might need to make.

So are you dealing with your financial decisions because you still owe that money?

Even if you didn't open up the envelope with the bill inside that says that you owe that money, you still are getting closer to retirement, even if you're not acknowledging or not saving for retirement.

So in what ways do you need to deal with some money questions, money issues, money problems, or even just some money realities?

This is super important because our lives don't get better when we ignore them.

So if you're married, maybe you have, or maybe you should have a weekly money meeting where you're talking about some of the upcoming expenditures and maybe once in a while looking at your 401k balances and things like that.

Or maybe you have a financial advisor and you have quarterly meetings, semi annual meetings where you're looking at, here's where our net worth has improved, here's what our investment returns have been, here's what our upcoming tax liabilities might be.

And especially for the self employed people and the business owners of the world, taxes can be a major sticking point because you don't have to pay them, you do have to pay them, but you cannot do it.

And it's okay until tax time comes around.

Whereas if you have a job, you will typically have taxes withheld from every paycheck and it's hard to get that far behind.

So not dealing with money and money questions and financial realities is a huge problem that I've seen over and over.

Now.

One of the things that I do for my clients is we do look at financial realities, we look at a balance sheet so we know what our clients have as far as assets and liabilities, so we know what net worth is.

We know, we look at all of the major numbers so we know if they're moving in the right direction.

And if they're not, we can come up with a plan to help them to move in the right direction.

Yes, I am biased, but I think working with a financial advisor who's one of my main jobs is just to help my clients to actually do the things that need to be done.

So if you work with a financial advisor who has that sort of an attitude, it can certainly move you in the right direction and help you to build wealth and not to cause your own financial problems.

All right, so what if you went to www.weeklywealthpodcast.com and if you click on the microphone icon and leave me a voice message, let me know what some of your financial mistakes are.

It can be some small things.

It can be death by a million paper cuts.

It could be some large things.

But this would be interesting to know because I think we've all made mistakes.

And as we've seen, we have some athletes and we have some entertainers that make tens or hundreds of millions of dollars.

And even with that money coming in, it did not prevent financial hardship.

So don't be under the misconception that if I just make more money, I won't have financial issues.

Because you know what they say, mo money, mo problems.

Right?

So let me know.

Www.weeklywealthpodcast.com Click on the microphone icon le a voicemail.

All right, everybody, like I say, every week, it's a privilege to bring you this information.

I love producing the Weekly wealth podcast, both just to give something back to the world, but also, quite frankly, it is a marketing tool for my wealth management practice.

So speaking of my wealth management practice, if you've ever wondered what it might be like to work with me personally as your financial advisor, the process is simple.

You can go to my website, www.weeklywealthpodc, click on the contact us button.

That'll bring you to my calendar and from there you can schedule an appointment where we will just talk via zoom or in person if you're local, about some of the 30,000 foot level aspects of your personal financial situation.

We can talk about your hopes and your dreams and some of the things that might be keeping you up at night, and we can point you in the right direction and decide if there are some next steps.

So it really is that simple.

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So.

Www.weeklywealthpodcast.com Click on the contact us button at the top.

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All right, everybody, I hope that you enjoyed this episode.

I hope that you learned something.

I hope that you've seen that if you do have some financial behaviors that aren't awesome, maybe you're not alone.

There are people that make mistakes or people that maybe just avoid things, or people that just get so busy and things fall through the cracks.

But it's never too late.

Late to make some changes.

And I am here to help.

And here is my parting thought for this episode.

So give yourself some grace.

If there are some areas in your life, whether it's financial or physical or with your relationships or any part of your life where you maybe just you've had an oops, you maybe you haven't handled things exactly perfectly or your results have not been exactly what you would have wanted, give yourself some grace.

But also let's make today the day that we take that step to not let those mistakes keep happening.

So where do you need help?

Do you need a financial advisor?

Do you need accountability?

Do you need a personal trainer to help you to get in shape?

Do you need a therapist?

What do you need so that these mistakes do not continue to happen?

Let me know if I can help you.

And I hope that this was a great episode for you.

Yeah, Tommy Paul listened to this episode, please, and share it with all your tennis playing friends.

One of these days I'd love to hit a tennis ball with you.

All right, everybody, have a great week.

Thanks.

Bye bye.

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