In it to win it.

FINANCIAL ABCs

For:

Off the Field – Players Wives’ Association

August 10, 2012

Presented by:

Caralee Allsworth, CFP® & Lana Hock, CFP®,ChFC® & CDFA™

The Hoffman & Hock Group

A is for Athlete: In 2009 Sports Illustrated published an article

titled “How (and why) Athletes Go Broke”. The article states that 78% of former

NFL players have gone bankrupt within 2 years after retirement.

The Article Sites 4 Key Reasons:

1. The Lure of the Tangible – stocks, bonds, and other investments are

“invisible” and boring – inventions, nightclubs, car dealerships and Tshirt

companies have the advantage of the thrill of tangibility.

2. Misplaced Trust – athletes go through an extraordinary

metamorphosis of financial challenge. They most often have

attended college on a scholarship, then drafted – haven’t even

learned the basics of budgeting or keeping receipts. They make two

common mistakes – hiring the wrong people as advisers, and trusting

them far too much.

3. Family Matters – touchy subject, divorce, death, disability.

4. Great Expectations – of themselves and from others – Many people

around them expect help of money or jobs.

But a recent article (2012) from Fox Business quotes what we believe “NFL

players make the same kinds of financial mistakes regular people make” they live

beyond their means, become victim of Ponzi Schemes, and make risky

investments.

Here are a few more “Letters of Recommendation!”

B is for Budget: One reason for all those financial meltdowns is

that they spent too much money. The first step in creating a budget is to find out

where your money is going now. Spend Income, not principal. If you receive a

$1 Million dollar bonus, that is principal. If that 1 Million dollars ears $50,000,

that is income.

Q is for Quicken – financial software that can help you find out

where the money is going and help you monitor your progress in following your

budget.

C, F & P: No it is not the CERTIFIED FINANCIAL PLANNER™

certification that Caralee and I both have. It stands for Comprehensive Financial

Plan. Every great financial outcome starts with a plan. We often say that you

must “plan for what you cannot predict.”

D is for Diversification. U is for the “Umbrella Story”. I won’t read

aloud the umbrella story, but it is a simplistic example of how diversification

works. Diversification helps reduce risk and volatility. It does not necessarily

increase return. Also attached is a chart with many colored blocks on it. Each

color represents a type of asset, and they are ordered each year from the top

performing asset class to the worst performer. Look at the chart and tell me

which class you think will be the top performer next! You can’t tell, and neither

can we! That’s why we diversify.

E is for Education. Your husbands’ probably spent zero for their

education. Unless your children are very talented and/or very smart it will cost

much much more. Start planning now. A 529 college saving plan may be a way

to start.

G is for Goal. Financial goals have $$ signs and specific dates. For

example: we need an income of $10,000 a month when we are 66 years old. NFL

families have a head start with the programs the NFL has for you but it won’t be

enough.

Houses & Mortgages. The SI article I mentioned at the onset

states that over-allocation to real estate is the number 1 problem. Buying a

house (or houses) is one of the most important financial decisions people make.

The financial/credit crisis of 2008 affected all of us. We recommend the goal of

NO mortgage by retirement. $1 Million mortgage results in almost $2 Million

paid with interest + ongoing maintenance. Treat is as an asset class with no more

that 10-15% of your total net worth in real estate.

I is for Inflation. Inflation is one of the biggest risks of all. Our

dollar loses value every day.

R is for Risk. There is no such thing as no risk. If it

sounds too good to be true, it probably is. Some investments are riskier than

others. Business opportunities – restaurants, franchises etc. fall into this

category. A good rule is to invest only what you can afford to lose and invest

only a percentage of your assets.

J is for “Just Say No”. Disreputable people see athletes’ money as

very easy to get to. How to handle “new people”, people in search of handouts

or who have a great investment idea – tend to stretch the definition of friends

and family. (The lure of the intangible) “fail proof/no downside”. Just say No!

K is for Keep it Simple. The financial industry is good at coming

up with all sorts of very complex investments vehicles. If you don’t understand

it, don’t do it. Plain vanilla is usually best.

L is for Liquidity. The phrase “Cash is King” sometimes refers to

liquidity. High net worth individuals tend to own more illiquid investments.

Private Placements/LPs

Restaurants

Collectibles

Real Estate

How quickly assets can be converted to cash determines your liquidity –

unforeseen situations may come up that require it. This supports the need for a

Comprehensive Financial Plan.

N is for Noise. Investment headlines sell newspapers. Whoever

shouts the loudest (ala Jerry Cramer) makes the biggest story. We have so many

24/7 investment channels – it is important to remember that CNBC is in the

entertainment business, not the financial advisory business. We have become a

culture that looks for “defining moments” in everything that happens. Can you

think of some alarming words you’ve heard on TV about the markets? When the

stock market is in turmoil (for good or ill), investors need a strong filter to help

them make good decisions. Focus on your plan – and listen to the music

channel!

O is for Order. Is your life in order? Do you have a will? Are your

will and trust up to date? Are the beneficiaries of all the pension accounts

correct?

S is for Save. “Pay yourself first”

T is for Team. You will need more that one advisor. That team

will probably include a financial advisor, a lawyer and an accountant and possibly

more.

V is for Volatility. Cartoon – There is nothing that does not wiggle

up and down. Even cash loses value because of inflation.

This is one of my favorites –

W is for Women/Wives. As women,

we have unique financial strengths. We are able to plan longer-term. We seek

detailed information before making an investment. We admit when we’ve made

an investment mistake. We are much more likely to consult a professional.

Women are rising to the challenge – 60% of all the wealth in the US is controlled

by women – many are in charge of the household finances. Greater financial

engagement – 9 out of 10 women will be solely responsible for their finances at

some point – life expectancy. Building financial awareness and knowledge is a

critical success factor.

We are out of time…actually couldn’t think of anything for these

letters anyway.

Robert W. Baird & Co. Member SIPC. Diversification does not assure a profit or protect

against loss.

The Umbrella Story

Allen Smith has the opportunity to purchase shares in two businesses. The

first is a suntan lotion manufacturer (Tipper’s Sun Lotion) and the second

manufactures umbrellas (Liberman’s Umbrellas). Both businesses are

greatly affected by the weather. If it’s rainy, Liberman’s Umbrellas will

have a return of 25%, and Tipper’s Sun Lotion will lose 10%. If it’s sunny,

Liberman’s Umbrellas will lose 10% and Tipper’s Sun Lotion will have a

return of 25%.

Allen Smith expects half of the year to be rainy and the other half to be

sunny (obviously, he doesn’t live in Phoenix). If Allen buys Liberman’s

Umbrellas, he will have a return of 25% half the year and lose 10% for the

other half. On average, Allen will earn a return of 7.5%. If Mr. Smith buys

Tipper’s Sun Lotion he will also get an average return of 7.5 %, but the

timing of gains and losses will be reversed.

If Allen only buys shares in one of these businesses, and he proves to be a

poor weather psychic he is taking a risk. However, if he buys equal amounts

in both companies, come rain or come shine he will earn 25% on half of his

investment and lose 10% on the other half. Therefore, he eliminates the risk

and still has a net return of 7.5%.

DISCLAIMER: This is a hypothetical story intended to illustrate the value of

diversification.

Caralee Allsworth

Why Diversify? Because Winners Rotate.

Annual returns of key asset classes 1991 through 2011

Allocating your investments among diverse asset classes can help insulate your portfolio against

market fluctuations and underperformance in any single class.

Large Cap Core represented by S&P 500 Index; includes a representative sample of 500 leading companies in leading

industries of the U.S. economy. Large Cap Growth represented by Russell 1000® Growth Index; measures the

performance of those Russell 1000® companies with higher price to-book ratios and higher forecasted growth values.

Large Cap Value represented by Russell 1000® Value Index; measures the performance of those Russell 1000®

companies with lower price-to-book ratios and lower forecasted growth values. Mid Cap represented by Russell Midcap®

Index; measures the performance of the 800 smallest companies of the Russell 1000® Index, which represent

approximately 25% of the total market capitalization of the Russell 1000® Index. Small Cap Core represented by Russell

2000® Index; measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represent

approximately 8% of the total market capitalization of the Russell 3000® Index. Small Cap Growth represented by Russell

2000® Growth Index; measures the performance of those Russell 2000® companies with higher price-to-book ratios and

higher forecasted growth values. Small Cap Value represented by Russell 2000® Value Index; measures the performance

of those Russell 2000® companies with lower price-to-book ratios and lower forecasted growth values. Fixed Income

represented by Barclays Capital Aggregate Bond Index, which is comprised of approximately 6,000 publicly traded bonds,

including U.S. Government, mortgage-backed, corporate, and Yankee bonds with an average maturity of approximately 10

years. Int’l is represented by The MSCI EAFE Index, which is an international index measuring market performance of 21

countries in Europe, Australasia, and the Far East. Indices are unmanaged and are used to measure and report performance

of various sectors of the market. Past performance is no guarantee of future results and diversification does not ensure

against loss. Direct investment in indices is not available. Equal Weight portfolio calculated by investing evenly (11.11%)

across all asset classes. The Russell Indices are a trademark of the Frank Russell Company. Russell® is a trademark of the

Frank Russell Company.

1. Transparency & a willingness to share the trials and hurts in your life create healing for you and others. #TeamHodgins
2. Rest and sleep are VITAL for the recovery of an athlete’s body and brain, especially those who hit or have been hit a lot.  More on CTE in another post.
3. The NFL is taking steps to create a league-wide program that help focus on the needs and concerns of an athlete’s significant other, as evidenced by Angela Charlton’s presence at #OTFinOC.
4. Every…repeat…EVERY athlete will grieve the end of their playing days.  NFL players grieving periods vary, however 1-2 years seems average.
5. Probably since a very young age professional athlete’s brains have been programmed for their singular career.  Most pro athletes have never worked at a desk, created a resume or had to interview for a job.  Professional resume creation is advised for players interested in coaching and a variety of other careers after football.
6. Transitioning out of the game will put stress on your marriage.  THIS IS NORMAL! Determining new roles in your home, a new “normal” in everyday life and new careers are stressful.
7. Athletes tend to go for tangible investments like new business ventures, restaurants, real estate- areas where the risk is highest and the athlete or their wife’s expertise is lacking.  We all need to just SAY NO to making tangible or highly risky investments, unless we are willing to thoroughly educate ourselves on the business/niche market.  If you do invest in tangible businesses only invest an amount that you are willing to lose.
8. Multi-level marketing companies (like Stella & Dot, Mary Kay, Cabi, Advocare) are a great business model for entrepreneurial ladies who may have to move a lot and/or have young children and limited time.
9. 10-15% of your net worth would be a wise amount to spend (total purchase price, not just the down payment amount) on your house.  Look at your home in terms of another diversification in your portfolio.  Thank you, Caralee Allsworth.
10. Everyone left #OTFinOC with more tools to lead an inspiring life & with more friends than when The 2012 Conference kicked off last Friday.

For more about Off the Field www.OffTheFieldpwa.com or @OTFPWA on Twitter

There are not words to fully express the level of respect and admiration earned for Team Hodgins testimony tonight, the NFL’s (corporate) presence or the new Off the Field board. Each possessed a transparency and a professionalism that were awe inspiring.

Never have I been so humbled to be part of Off the Field than from what I experienced tonight.

#OTFinOC #community #impact

There’s something truly magical about the NFL draft. Like most things 

associated with this most prosperous of sports organizations, there’s 

nothing understated about it. Live from the Big Apple, fans around 

the world are privileged to watch the future unfold for 250 or so of 

the nation’s best collegiate football players. This is “The Beginning,” 

the time sandwiched between potential and production, where 

absolutely anything is possible. 

This is the good part, ladies. Strike that – this is the GREAT part. And not 

just for the players. Mothers, fathers, aunts, uncles, friends, neighbors, 

dentists, barbers, plumbers –anyone who (accurately or not) counts 

themselves among the inner circle of a new player’s posse – are all 

treated to the vicarious thrill that comes with saying “I know that guy!” 

And significant others? Not to worry. Even players not known for their 

particularly generous nature always bestow a bauble or two among 

the wives and/or girlfriends during this halcyon (meaning happy, 

carefree and prosperous) time. The NFL Draft is Christmas in April, 

baby! ­­ a tree decorated with 14 karat ornaments and icicles of 

bling. Haaaa! (read with sarcasm)

Yeah, right. Boxing is brutal. So is football, yet the game is changing to pretend like it’s not.

When all the rules are in favor of the offense, is it any wonder that 2011 shows passing yards unmatched in NFL history? Let’s wait for the weather to change and all that passing goes out the window…. Well I guess we’ve resorted to domes. I remember back in the day when teams played in the snow and QB’s got rocked!!! #defensewinschampionships

It boggles my mind why all NFL teams don’t utilize wives & girlfriends in community service projects in every team city, every season. Ever since participating in the many volunteer opportunities created & offered by the Chiefs it seems like a fantastic way to serve the community and leverage a player’s name during the season. Kudos, Chiefs your CWO serves KC well!

If your stadium does not offer a family room, I highly recommend finding a stadium security officer in your section with a walkie-talkie.  Introduce him or her to your children (& other wives kids). Tell them of your relation to a player. Kids love to roam the stadium (bigger kids usually, but maybe a sitter or older sibling takes a little guy for a walk). If they are wearing a cute: “Dad #30” jersey or just team gear, it is always better to have the right kind of eyes on them at all times (aka Stadium Security)!

A pro sports career is the ultimate high. Coming down from football, aka forced retirement, is a two year process. Prepare accordingly.