Two years ago, Cole Caufield had no salary. Today he raked in $7.64 million, including $5 as a contract bonus this week. By the age of 31, it will be $65.4 million ($87 million Canadian). How is all this handled?
He made his money, and this column isn’t meant to challenge that, but rather to show how a young man from a humble background can deal with becoming so instant rich.
The list of athletes who have suffered financial setbacks is very long.
Boxer Mike Tyson went broke because of parties, luxury cars and exotic animals, among other things.
Former NFL star Terrel Owens was broke after bad placements on bad people.
Former Buccaneers tackle Warren Sapp also lost it all after lots of silly spends like $6,000 shoes and a $1,200 lion rug.
According to an analysis by Craig Brown, co-head of the athletic department at management firm NKSFB, one of the largest in the United States, around 78% of professional athletes experience financial difficulties within three years of their retirement. It represents a hundred athletes in major sports.
It doesn’t even come close to changing the world
Cole Caufield doesn’t have the profile of a young man losing his card for money. But imagine how his life changes. “It doesn’t change the world” is a big lie.
Everyone at the bar will think they’re paying for the rounds.
He could simply pick up the bill in the restaurant.
His best friend dreamed of a trailer he could buy him one.
Her elderly aunt loses her mobility and needs to renovate her house so she doesn’t go to a retirement home. Why not?
His old good friend from college is launching a groundbreaking web app, let’s go Cole.
His former pee-wee coach needs money for his hockey school, Coco will take care of it.
And he can buy what he wants and do what he wants. Whether it’s silly or not. Whether you like it or not. It will not be too serious, there will be a lot of money.
The temptation
Imagine you have a small truck that is not too problematic. But that you have everything you need to dive right in. Most people fight back. But not all.
Per day worked (each game), Caufield will make $162,900 this year. That’s about $8,573 a minute on the ice.
And all this ignores the money he gets and will get through sponsorships. It shouldn’t have been this bad at McDonald’s last year.
“A player like him will attract sponsors, which can even double his salary,” says Fabien Major, financial planner and wealth management consultant at Assante.
I’m not aware of all of Caufield’s extravagant spending since he joined the CH. Publicly, we learned that he had bought a Toyota Supra for $60,000 and a modified Jeep Wrangler that must have been worth about $80,000. If he pays cash, he still has $5.5 million in a year after taxes for the remainder. He should be fine.
The car guide continued
The first thing he should do for his finances is to choose his tax location carefully. In Montreal it is taxed at 52.52%. In Michigan it will be 42.2%. So all he had to do was own a Michigan home and he could save 10% on taxes. It’s already $13 million he’s saved over his 31 years.
Great investments
Then his investments. “An athlete could definitely say: ‘I’ll have fun with my sponsorship income and my income from work will flow into a long-term security structure,'” explains Fabien Major.
In other words, Caufield might have so much money from sponsorships and marketing that he might well decide to invest all of his earnings.
And that, according to Mr. Major, is the key. He needs to put some money aside.
“You have to consider that he is a young man of 22 years. He will be assailed by proposals of all kinds and it will be necessary to establish firebreaks around him that will make it possible to protect him from certain influences,” continues the financial planner, who recalls that the duration of his career is limited in time and that an injury could put an end to this game.
“You have to secure a large part of your future income […] in a somewhat untouchable structure to influences,” he continues.
According to Mr. Major, this structure can be a trust that is often used by athletes, he explains. In addition to Caufield, three people of his choice will be responsible for his investments with the sole aim of protecting his wealth over the long term.
It will be credited
One thing’s for sure, though: Caufield can certainly get carried away with a $10 million house. “I think that will prove to be a credit,” laughs Mr. Major. He can afford not to see everything as an investment, he emphasizes, and treat himself to “nice expenses,” he adds.
Photo from the Facebook page
If Cafiled wants to ensure a good retirement or the future of his future children and grandchildren, this is a great opportunity.
Assuming Caufield decides to just live off his sponsorship earnings and invest his salary, the payoff is pretty staggering.
Using the Bank of Canada’s calculation tool, if Caufield were to retire at age 31, his worst-case scenario would be $154.6 million if he put his salary into a trust fund with a 7% annual return and would receive the repayment at age 60. It would give the Mini-Caufields a bright future and triple the value of his current contract.