By Panayiotis Constantinou, The Sports Financial Literacy Academy
Athletic success requires dedication, strategy, and planning—qualities equally essential for financial well-being. As athletes embark on a new year of training and competition, financial health often plays a pivotal role in their performance, career longevity, and personal peace of mind. Here’s how athletes can create a solid financial foundation by integrating smart money moves into their playbook.
Set Financial Goals Aligned with Athletic Milestones
Athletes are inherently goal-driven. Whether it’s shaving seconds off a sprint time or securing a championship title, goal-setting is part of the game. Financial planning should adopt a similar mindset. For example, consider professional tennis player Naomi Osaka, who made history as one of the highest-paid female athletes in 2023. Early in her career, Osaka worked closely with financial advisors to allocate her earnings toward investments, endorsements, and philanthropy. Her financial foresight allowed her to balance career ambitions with personal and societal contributions, including launching mental health initiatives.
Actionable Tip: Start the year by outlining clear financial goals. These can range from saving a percentage of competition earnings to investing in real estate or planning for retirement. Tie each goal to a tangible athletic milestone, such as completing a training cycle or participating in a major tournament.
Build a Budget for Training and Travel
Training expenses, equipment, and travel costs can quickly add up. Budgeting ensures athletes stay competitive without compromising financial security. Take Olympian swimmer Michael Phelps, whose early career was supported by meticulous financial planning from his team and family. By prioritizing essential expenses—like coaching and pool time—Phelps’ budget enabled him to focus entirely on his performance, which paid off in the form of record-breaking gold medals.
Actionable Tip: Athletes should create a detailed budget that accounts for all foreseeable expenses, from gym memberships to international travel for competitions. Use apps like Mint or YNAB (You Need A Budget) to track spending and adjust as needed throughout the year.
Establish Emergency Savings
Sports come with uncertainties—injuries, cancellations, or shifts in sponsorship deals can disrupt income streams. Building an emergency fund is critical for navigating unexpected challenges. For example, during the COVID-19 pandemic, many athletes faced income loss as competitions were postponed or cancelled. Soccer players in lower leagues, like those in Europe’s semi-professional circuits, often depended on emergency savings to sustain themselves through uncertain times.
Actionable Tip: Aim to save three to six months’ worth of essential expenses. This financial cushion ensures stability during periods of reduced income or unforeseen setbacks.
Leverage Sponsorships and Endorsements Wisely
Athletes frequently supplement their earnings with sponsorship deals, but these funds must be managed carefully. Poor financial decisions or overspending can derail even the most lucrative partnerships. NBA superstar Shaquille O’Neal offers a valuable lesson. Specifically, early in his career, O’Neal spent $1 million within hours of signing his first major contract. However, after consulting with financial advisors, he turned his financial situation around, investing in businesses and partnerships that now make up a substantial portion of his net worth.
Actionable Tip: Treat endorsement earnings as investments. Allocate a portion toward long-term growth, such as stocks, mutual funds, or retirement accounts, while using the rest strategically for immediate needs.
Invest in Personal Development
Beyond physical training, investing in education or skills development can open doors for athletes after their competitive careers. Athletes like Kobe Bryant transitioned smoothly into entrepreneurship post-retirement by equipping themselves with financial knowledge during their active years. Bryant’s venture capital firm, Bryant Stibel, was a testament to his forward-thinking approach. By diversifying his income streams and learning the intricacies of business, he set a precedent for other athletes.
Actionable Tip: Dedicate resources to learning about financial literacy, attending workshops, or hiring a trusted financial advisor. Knowledge is a powerful tool for making sound decisions.
Insure Your Assets
Injuries or career-ending incidents can jeopardize years of hard work and savings. Comprehensive insurance coverage can protect against such risks. Consider the case of British cyclist Chris Froome, whose insurance played a vital role after his severe crash in 2019. Having appropriate coverage ensured that his medical expenses and income loss were mitigated, allowing him to focus on recovery without financial strain.
Actionable Tip: Work with an advisor to secure health, disability, and liability insurance tailored to the specific risks of your sport.
Plan for Retirement Early
Athletic careers are often shorter than traditional professions, emphasizing the need for proactive retirement planning. Soccer (football if you are European) legend Lionel Messi exemplifies this principle. Despite being at the pinnacle of his career, Messi invested in real estate and other ventures, ensuring he remains financially secure long after his playing days.
Actionable Tip: Explore retirement options such as IRAs, pensions, or investment portfolios. The earlier athletes start, the more they benefit from compound interest.
In conclusion financial stability is as integral to an athlete’s success as rigorous training or a well-balanced diet. By setting clear goals, budgeting effectively, and investing in their future, athletes can ensure their financial health matches their physical prowess. The key takeaway? Approach finances like training—strategically, consistently, and with an eye on long-term success. Just as every warm-up sets the tone for a productive session, smart money moves today lay the foundation for a prosperous future.
The Money Smart Athlete® Blog is established and run by the Sports Financial Literacy Academy® (SFLA). Through its education programs, the SFLA has the vision to financially educate and empower athletes of all ages to become better people, not just better athletes. For more information on our courses, our SFLA Approved Trainer Program®, and how they can benefit you and your clients, please get in touch with us at [email protected].