Two years ago, Cole Caufield had no salary. Today, he pocketed US$7.64 million, including $5 as a signing bonus this week. At age 31, it will be $65.4 million (CA$87 million). How is all this handled?
He deserves his money and this column is not meant to question that, but rather to show how a young man from a modest background can navigate becoming so instantly wealthy.
The list of athletes who have experienced financial setbacks is very long.
Boxer Mike Tyson went bankrupt because of parties, luxury cars and exotic animals, among others.
Former NFL star Terrel Owens was broke after bad placements with bad people.
Former Buccaneers tackle Warren Sapp also lost everything after lots of silly expenses like $6,000 shoes and a $1,200 lion rug.
Some 78% of professional athletes have financial problems within three years after retirement, according to an analysis by Craig Brown, co-head of the sports division of the management firm NKSFB, one of the largest in the United States. It represents a hundred athletes in major sports.
It changes the world not nearly
Cole Caufield does not have the profile of a young man who will lose the card because of the money. But imagine how his life is transformed. “It doesn’t change the world” is a big lie.
Everyone at the bar will think they’ll pay for the rounds.
At the restaurant, he might just pick up the bill.
His best friend dreamed of a trailer, he could buy him one.
Her elderly aunt loses her mobility and needs renovations to her house so she doesn’t go to a seniors’ residence. Why not?
His old good friend from college starts a revolutionary web application, let’s go Cole.
His former pee-wee coach needs funding for his hockey school, Coco will take care of it.
And he can buy what he wants, do what he wants. Whether it’s silly or not. Whether it’s lust or not. It won’t be too serious, there will be lots of it, money.
The temptation
Imagine that you have a small vice, not too problematic. But that you have everything you need to dive into it instantly. Most people resist. But not all.
Per day worked (each game), Caufield will earn $162,900 this year. That’s about $8573 per minute on the ice.
And all that is ignoring the money he gets and will get with sponsorships. With McDonald’s last year, it shouldn’t have been that bad.
“A player like him will attract sponsors, it can even double his salary,” says Fabien Major, financial planner and wealth management advisor at Assante.
I do not know all the extravagant expenses of Caufield since he has been with the CH. Publicly, we learned that he had bought a $60,000 Toyota Supra and a modified Jeep Wrangler that must be worth around $80,000. If he paid cash, that still leaves him $5.5 million in one year after taxes for the rest. He should be fine.
the Car Guide resumed on the
The first thing he should do for his finances is to choose his tax jurisdiction carefully. In Montreal, it will be taxed at 52.52%. In Michigan, it will be 42.2%. So he would only have to be a property owner in Michigan and he could save 10% in taxes. It’s several million dollars saved by his 31st birthday.
Great investments
Then his investments. “An athlete could well say: ‘I’m going to have fun with my sponsorship income and my employment income is going to go into a long-term protection structure,'” explains Fabien Major.
In other words, Caufield could have so much money from sponsorships and marketing that he could very well decide to invest all his employment income.
And that’s the key, according to Mr. Major. He needs to put some money aside.
“You have to keep in mind that he is a young man of 22 years. He will be assailed by all kinds of proposals and it will be necessary to determine the firebreaks in his entourage which will make it possible to protect him against 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 one.
“You have to secure a large part of your future income […] in a somewhat untouchable structure against influences,” he continues.
According to Mr. Major, this structure can be a trust, often used by athletes, he explains. In addition to Caufield, three people of his choice will be responsible for his investments and will have the sole objective of protecting his assets over the long term.
It will go to credit
One thing is certain, however, Caufield can very well get carried away on a $10 million house. “I think it will go to credit,” laughs Mr. Major. He can afford not to see everything as an investment, he underlines, and allow himself “beautiful expenses”, he adds.
Photo taken from the Facebook page
If Caufiled wants to ensure a good retirement, or ensure the future of his eventual children and grandchildren, the opportunity is great.
Assuming Caufield decides to just live on his sponsorship revenue and decides to invest his salary, the profit is pretty mind-boggling.
With the Bank of Canada’s calculation tool, in the worst scenario where he would retire at 31, Caufield would receive $154.6 million if he placed his salary in a trust with a return of 7% annually and the recovered at age 60. It would give a nice future to the mini Caufields and it would triple the value of his current contract.