Sporting careers have a finite timeframe, and most sportspeople have two careers in their lifetime. However, when you’re flying high as an elite athlete, retirement is not always something you consider; especially when you’re in the early stages of your career and earning potentially large figures. Finishing sport in your mid 30s (if you’re lucky) is still a very young age to retire, and there is a lot of life left where you’ll want to maintain your lifestyle and support your family.
Sportspeople are often used to quick results, but that doesn’t necessarily align with planning for a second career and financial security where you often work for years before seeing success or results. Of course, we all want to see big wins quickly, but patience is so often key. In this blog, we look at what to avoid, and share our approach to creating a successful financial future.
Here are some common mistakes we see professional athletes make:
1. Living a lifestyle based on high earnings
Athletes can achieve high earnings in a short space of time and it’s easy to get carried away! It’s important to strike a balance between enjoying the rewards of your dedication and hard work yet creating financial security that’s sustainable beyond your sporting career.
2. Not having the right insurance
You’ll want to make sure you’re protected in case things go wrong or you have an injury. A professional athlete’s body is central to their current and future earnings from sport, so it makes sense to protect it. Athletes are also humans so need the typical insurances as well (home, car etc), but beware; insurance policies often have exclusions for professional athletes, so it’s wise to double-check the small print.
3. Building up large debts
This includes big mortgages or personal finance loans for luxury cars that are only sustainable based on high income levels from your sporting career. Having a plan to pay off your debt whilst playing will put you in a more robust financial position in the long-term. It’s also worth considering aligning the terms of any fixed-term arrangements with the year your contract ends. This is so that you can make changes and avoid early repayments charges (mortgages), or avoid being tied into a high payment loan that you can’t sustain once the contract ends.
4. Mismanaging your cash
Holding “enough” cash is important to any strong financial plan. We often see young athletes not holding enough cash, and problems can arise if they get injured, are out of contract, or simply dent their car. Conversely, we also see some hold more cash than they need to and miss out on maximising potential opportunities to grow their money.
5. Not taking advantage of tax planning opportunities
Either personally or through image rights companies if you have one. If you don’t understand your tax situation, or the implications of tax avoidance, the consequences can be punitive. People will sadly always want to take advantage of inexperienced sportspeople with a high income. Expert financial planners will help you stay on the right side of HMRC!
6. Too much focus on investment returns
Successful investing is about the long-term, rather than quick wins in the short-term. It’s easy to be impatient and attracted to the latest investment craze, such as crypto, NFTs, or even whiskey. However, it’s about focusing on long-term evidence and being strategic about where you are placing your, and your family’s wealth.
7. Putting all your eggs in one basket
It’s important for pro athletes to spread risk by investing their money into a well-diversified portfolio. This means investing in several asset classes such as property, shares, and bonds. It’s also important to diversify across different types of wrappers, such as ISAs and pensions, so you have access to your money when you need it, and benefit from tax efficient environments where possible.
8. Lack of discipline
Financial planning is not a “one and done” tick-box exercise. Consistency is key. You can improve your long-term position by automating a lot of your financial management and then regularly reviewing this versus your overall goals to make sure you’re on track. You can control this!
9. Delaying the planning
Don’t put it off or think you’ll be ok starting “tomorrow”. When it comes to career transition, so many athletes regret leaving the planning too late. We’re yet to find someone who thinks they started too early!
10. Not working with experts
You work with the best coaches, nutritionists, physiotherapists, and psychologists, but it’s just as important to work with a trusted financial planning expert. Every situation is different and financial planners – particularly those that specialise in working with pro athletes – will work with you to understand every nuance of your circumstances.
Given that an athlete’s career is so short relative to a traditional career, it’s important to take steps to improve your position early in your career if you want your transition to post-sporting life to be as easy as possible.
Paradigm Norton Sports is led by Dave Lewis, senior financial planner and former professional rugby player. Dave understands the financial opportunities to build wealth while playing sport, but also the financial and mental challenges athletes face when transitioning to the next chapter of their lives. He witnessed first-hand teammates and other athletes receiving either no financial advice or poor advice, which led to issues. Dave works closely with athletes, agents, parents, and coaches, to help make sure the clients he works with are in a position where they can choose what they want to do for rest of their lives without financial stresses weighing them down.
If you’d like to know more, please visit Paradigm Norton Sports to book a meeting with Dave Lewis.
Investing places your capital at risk and investments may fall or rise in value. You should seek competent advice before taking any action.
