Although we love college basketball, here at Zoe, we also have an affinity for numbers. Which is why we thought it might be fun to see just how influential an NBA drafting would be for this golden boy’s career, and how ours stack up in comparison. Of course, with all Zoe employees comfortably in their late 20s and thirties, the dream of being a successful athlete have long run off into the dark abyss of fine lines and a tenacious lower belly, but what the hell!
The chart below illustrates Hart's career potential. This term “career potential” is equal to the present value of your future salaries.
(*The methodology for this example is outlined at the end of this post)
As you can see on the above chart, on the day of his rookie contract signing, Josh’s career potential could be close to $12 million if he’s a mid 1st draft pick and start earning an NBA player salary. Well… more like $7 million after taxes. Although an annual salary of $7 million is a lot of money, surprisingly the overall career potential is roughly the same as that of a 34-year-old lawyer that makes $225,000 per year. As you can see in the chart below, a main driver for the similar career potential is the duration of the career. Josh’s NBA career is much shorter than say yours or mine, but it should be offset to some degree by the higher starting salary and per annum growth rate. It is worth noting that Josh’s NBA annual income will be a lot more volatile than that of a corporate lawyer, which explains why the bars are a lot smoother for the lawyer.
Essentially what we can see is that with each year closer to retirement, Josh’s earning potential decreases, as he has fewer years left to earn a salary. When he does eventually retire, his NBA earning potential (and remember we are purely talking about on court earnings here for simplicity’s sake) will be zero. Luckily, Josh will be graduating from Villanova with a college degree, which should help him to start a strong second career post his NBA days. Or if he saves over 25% of his yearly NBA income, he could potentially live off his savings and investments for the rest of his life!
If you want to see how that would work comment below and if we get enough responses we will do the exercise - any excuse to stay on the topic of March Madness!
At the end of the day, whether you are Josh Hart or a slightly overweight lawyer in his mid 30s, your best income years are still ahead of you! To see what your career potential is and how you can change certain variables to make your long term financial outcome better, head over to zoefin.com and get your free financial assessment from our director of financial planning.
Zoe – because there’s more to finance than just the numbers.
To create Josh’s chart, we used his current age and made assumptions on his salary growth trajectory based on recent mid 1st round draft picks and endorsement deals worth $500,000 starting in his 4th year in the league.
- Age: 22 years old
- Starting Salary: $1,600,000
- Growth rate of salary:
- 2nd year: 4.5%
- 3rd year: 4.3%
- 4th year: 82%
- 5th year: .34%
- 6th year: 20%
- Retirement age: 29 years old (based on the average NBA career length of 4.8 years… OK we gave him a few extra years, he is a Wildcat after all!)