By Panayiotis Constantinou, Contributor
Navigating the financial landscape as a professional athlete, requires more than talent on the field; it demands strategic financial planning and disciplined budgeting. Inspired by the ‘Premier Sports Network’s article on ‘Athlete Financial Planning’, let’s delve into five effective budgeting techniques, complemented with real-world examples from the world of sports, to illustrate how athletes can secure their financial future.
- The 50/30/20 Budget: Balancing Essentials with Investments
Example: Consider the case of Steph Curry, an NBA superstar. If he adopts this method, 50% of his net income could be allocated to essential expenses such as mortgage, training expenses, and family needs. 30% could be directed towards lifestyle choices like leisure travel and hobbies, and the remaining 20% could be strategically invested in diversified portfolios or his production company, Unanimous Media.
- Pay Yourself First Method: Prioritizing Savings
Example: Naomi Osaka, with her substantial earnings from tennis and endorsements, could exemplify this approach. By setting aside a fixed percentage of her income into savings and investments before other expenses, she ensures a steady growth in her financial reserves, perhaps channeling funds into her mental health initiatives or other personal ventures.
- The Envelope System: Managing Spending with Discipline
Example: A rookie athlete like NFL’s Joe Burrow might find the envelope system beneficial. Allocating specific amounts for defined expenses like rent, training equipment, and leisure activities, and sticking to these limits, can help him manage his newfound wealth responsibly, preventing overspending.
- The Zero-Based Method: Detailed Financial Tracking
Example: Roger Federer, known for his precision, could use this method to meticulously manage his finances. Every dollar of his income from tournament winnings, endorsements, and other ventures could be assigned a specific purpose, ensuring a disciplined approach to his substantial income.
- Value-Based Budget: Aligning Spending with Personal Values
Example: LeBron James’s budgeting might heavily lean towards philanthropy and community support, reflecting his personal values. Allocating significant resources to his educational and social initiatives, while also investing in his media company, SpringHill Entertainment, aligns his spending with his passions and long-term goals.
The key however to successful budgeting is customization and flexibility. Each athlete’s financial plan should be as personalized as their training regimen. A young soccer star like Erling Haaland might focus more on savings and investments given his rising career, while a veteran like Serena Williams might prioritize diverse business ventures and philanthropy. It is of paramount importance that athletes should collaborate with financial advisors who specialize in sports finances, like how Michael Jordan has worked with financial experts throughout and after his basketball career to build a successful brand and business empire. A further exemplifying case is that of Venus Williams; she is a role model athlete, who athletes who not only excels in sports but also pursues education in business, and sets an example for financial literacy. Understanding the fundamentals of finance, enables athletes to make informed decisions and maintain control over their financial destiny.
In addition, athletes should always strive to diversify their income streams for long term security. Athletes like Shaquille O’Neal, who have diversified their income streams through various investments and business ventures, demonstrate the importance of not relying solely on sports earnings for financial stability. Lastly, philanthropic endeavors can play a pivotal aspect of financial planning. Indeed, engaging in charitable activities can be a rewarding aspect of an athlete’s financial strategy. Figures like Manny Pacquiao, who is known for his philanthropic ventures illustrate how athletes can contribute to societal welfare while managing their finances.
Conclusively, for athletes, mastering the art of budgeting is as crucial as excelling in their sport. By adopting tailored budgeting methods and leveraging professional advice, athletes can not only maximize their earnings during their peak years but also secure their financial well-being long after their sports careers have concluded. From the disciplined savings strategies to value-driven spending, each athlete has the opportunity to craft a financial plan that aligns with their unique career trajectory and personal goals.
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].
