Saving, investing and long-term financial planning might not be top of mind for a young, high-earning professional athlete. However, given the timespan of a typical professional sports career, it’s critical to think about this early if you want to make your transition into post sporting life easier. In short, both saving and investing are important, but the balance must be right, and it can be hard to achieve.
Dave Lewis, financial planning expert and former professional rugby player, explains what to concentrate on, whether you should save or invest, and how you should invest your money. Understanding these areas are the first steps in planning for a secure financial future during your career, and once you have retired.
Should I save or invest?
You might have heard people use the terms savings and investments interchangeably, but they mean different things. They each play an important role in your personal finances and could be seen as part of your attack and defence strategies in sporting terms.
- Savings: this is setting money aside either for emergencies, or for a known purpose, at a known time, often in the next few years. You want this money to be accessible, with little to no risk of it fluctuating in value. Maximising savings rates is important, but access and peace of mind is higher priority than high returns for this pot.
- Investing: this involves taking additional evidenced-based risks. With investments, you accept the risk that the money invested could go down as well as up over the longer-term (five years or more), with the expectation that the value will increase above cash and inflation over the long-term.
Where professional athletes have shorter careers, their savings rate, which is the percentage of income you can regularly save, will have the biggest impact on finances. The good news is this is something you can control.
What should I consider when investing my money?
When it comes to financial planning for sports professionals, our approach is to accept and manage what we can’t control and take responsibility for what we can. Where you should invest your money is personal and something that a financial planning expert can offer advice on. They will factor in many elements; your goals, stage of career, contract length, and lifestyle plans beyond sport to determine the amount of cash it’s suitable to hold, how much to invest, and where.
Becoming a financially successful athlete
At Paradigm Norton Sports, our advisers play a key role in helping athletes make informed decisions. This ranges from coaching to explore what money means to you, education on good money management, understanding your financial habits, and how to implement good savings and investing strategies which align with your goals.
If you’d like to know more, please visit Paradigm Norton Sports to book a meeting with our sports team.
Investing places your capital at risk and investments may fall or rise in value. You should seek competent advice before taking any action.