The general belief is that people who have lots of money don’t need to follow a budget. This is not true in the case of athletes; the special financial circumstances of their professional career, their expected lifestyle and tons of stories out in the media about athletes going from “riches to rags”, make budgeting an absolute necessity. It is really important for the professional athlete to understand how imperative it is to set a budget and stick to it, but trying to see the big picture and taking a long term view is difficult when you are earning big amounts of money.
A budget is a summary of your expected income and expenses for a period of time, usually a week, a month or a year. While the word budget is negatively connected with restricting your spending, a budget should really mean more efficient spending.
Use the following steps to prepare your monthly budget:
- Try to gather any financial statements you have available like bank statements, insurance bills, electricity and water bills, and any other information regarding your sources of income or expenses which you will use later in the process of creating your budget.
- Write down all your sources of income. These may include your playing contract salary, income from exploiting your image rights or any other source. Record this total income as a monthly amount.
- Write down a list of all the expected expenses you plan to make over the coming month. This includes any mortgage or loan payments, insurance payments, groceries, utilities, retirement savings. Everything you spend your money on.
- Then you need to separate your expenses into fixed and variable. Fixed expenses will be relatively the same each month and are essential for you, things like mortgage or rent, electricity, internet service and so on. Variable expenses will change from month to month and may include groceries, gasoline and expenses for going out. Variable expenses are what you can adjust if you find yourself in a negative balance when doing your budget.
- Now calculate the total of your monthly income and monthly expenses and if you have more income than expenses you are off to a good start. You can use this excess for retirement savings or any other investments, even repaying early any outstanding loans you have. If your expenses are more than your income, you will need to start making some cuts on your expenses or find ways to make more money.
- Try to adjust your spending so that your inflows and outflows are equal. This means all of your income is accounted for and budgeted for a specific expense, savings goal or investment.
- Review your budget on a regular basis in order to stay on track. At the end of the first month take some time to compare the actual expenses you made against the ones you wrote down in the budget. This way you can see where you did well and where you need improvement.
Try to create a budget which includes all of your fixed and variable expenses, which is realistic and review it constantly. The most important thing though is to stick to your budget. If you think you need help with creating your budget you can start working with a financial advisor who will guide you all the way.
For assistance on creating a realistic budget please contact Athena Constantinou at [email protected]