Most aspiring young athletes are so focused on their careers that they hardly have time to think about their finances. You may earn a seven-eight figure salary one day. But as a young aspiring athlete, you will have a modest beginning.
Other professionals can look to boost their income for three-four decades once their careers take off. However, athletes have a short career span. Plus, most players have to watch out for the curveball. Even a tiny injury can bring your flourishing career to a screeching halt.
That’s why financial planning needs to be your priority from day one. Let’s check out a few tried and tested tips that can help you plan your finances and safeguard the future.
Understand Your Incomes and Expenses from Day One
Yes, many schools and universities now spend big bucks on their sports programs. UT Austin spends around $307,723 in expenditures per student-athlete. While your college or university will pay for your training, tours, and sports gear, among other things, you will have plenty of out-of-pocket expenses.
You will need to start thinking about your financial future when you receive your first paycheck. Once you understand how much you are earning and spending, you can cut back unnecessary expenses. Think before splurging.
Do you need a fancy car?
Or a wardrobe overflowing with branded clothes and footwear?
Understandably, you’ve worked hard to make this money. But your expenses need to be within the budget you have in mind. Take a long hard look at your income, and basic needs, and plan your lifestyle choices accordingly.
Plan Your Retirement Early and Carefully
Retirement planning for athletes is a different ballgame altogether. Most athletes have very short careers. The average career in pro football is three and a half years across the different positions, with running backs having the shortest careers of just over two and a half years. In other words, you will be retiring as a pro-athlete in your 30s. That’s why your retirement plan needs to be different.
You will have to pay off your debts, buy a house, save money for a rainy day, and make income-producing investments before hitting the early 30s. You can’t go anywhere near a comfortable retirement if your planning is off to a late start. So, don’t waste your time. Start safeguarding your future as early as possible.
Pay Off Your Debt First
Paying off your debt needs to be your priority. As your career is relatively short, you will have to pay it off as early as possible. For most athletes, it’s the student loans and a mortgage. Instead of spending your excess income on a lavish lifestyle, consider paying off these debts first.
Paying off your debt early comes with benefits like:
- Huge savings on interests
- Having more money in your monthly budget and future investments
- Lower debt-to-income ratio
Understand Your and Plan Taxes
All athletes sign contracts, endorsements, and promotion deals. Every deal you sign adds to your income, which attracts taxes. You need to understand how taxes work to help save as much money as possible. There are different tax strategies out there.
For example, living in a no income tax state like Florida, Nevada, or South Dakota can help. This strategy may allow you to make significant tax savings. Most athletes and players also have to pay a withholding tax to the visiting state for every game played in the respective state. However, you also get a tax credit in your home state for the withholding taxes you pay in other states.
This strategy can help you offset some of the tax. If your home state has a higher tax slab, you will have to pay more tax than expected. But if not, you may be able to save some money in taxes. Depending on your home state, income, and a few other factors, you can also claim tax deductions. Think all this through to keep your tax liability to a minimum from the get-go.
Consult a Professional Financial Advisor
Even young aspiring athletes are in the public eye, thanks to the growing power of social media. It’s a common perception that all athletes earn outrageous salaries, making them a prime target for get-rich-quick schemes.
Scammers will usually target young athletes as they are easy targets. You must remember not to invest in any such schemes. If it sounds too good to be true, it probably is. So, stir clear of such short-term risky investments. Instead, focus on what is important for your future life – long-term financial planning.
That’s where a professional financial advisor comes in. A professional financial consultant can help you focus on the basics of financial security, including budgeting, spending, investing, saving, taxes, and insurance. Make sure to find a certified and experienced local financial advisor.
For example, if you live in Gainesville, FL, you can seek financial advising in Gainesville from a reputed and reliable advisor. Choosing a local financial advisor means you can meet the person who will advise you. Plus, you will also get personalized financial services. It’s easier to reach your financial goals when you get recommendations tailored to your specific needs.
Athletes are used to planning every more carefully on the field. Why should financial planning be any different? Given how short an athlete’s career is, you need to start planning your future as soon as possible. While these five tried-and-tested tips will help you safeguard your future, you should consult a certified financial advisor first.
It’s your financial future on the line. You must make a well-informed decision when it comes to your hard-earned money. So, find a suitable advisor quickly.