Let me start with a cautionary story. Our football client shared a story about a teammate who wanted to build a pool in his home after learning that everyone else had one. There was no avoiding the cost. He spent seven figures on the project, and was eager to share the results with everyone. He was beaming with happiness after receiving positive feedback. However, a few of his friends pointed out that similar work had been done for half the cost. He was not only overpaid, but he could not even swim.
It doesn’t matter if you are looking to make home improvements, but taking time to manage your finances can have a big impact on your life and lifestyle. These budgeting tips will show you how to make your money work harder.
Stick to your budget
For the majority of players, it is a harsh reality that once it’s gone, it can’t be easily gotten back.
It is possible that your earnings from the next few seasons will be sufficient to support you for 50 years. The UK has a high average life expectancy of over 80 years. Although it may seem obvious, you can plan ahead by creating a budget for each month, tracking your spending, and saving the rest for the future.
One of our footballing clients saved thousands of pounds per month by simply going through all his standing orders and cancelling any that were not needed. He was able to reduce his spending after a few hours of working with one my colleagues.
For some players, cancelling just a few direct debits might not be enough. If you’re struggling with debt, the first thing to do is admit it and get help. Many players have built large debts from trying to live a life that was not compatible with their income. With honest and impartial advice, it is possible to go back to your path to recovery in most cases.
Make sure your finances are tax-efficient
It’s possible to avoid tax by using clever tax-avoidance schemes. Given the current economic and political climate, anything too outrageous is likely to be a problem for the taxman.
Make sure you do the basics correctly, including maximising your pension contributions. You could be eligible for up to 50% tax relief during the current tax year.
You might consider making a risk and investing in a new business through a Venture Capital Trust, Enterprise Investment Scheme or Seed Enterprise Investment Scheme. These offer income tax relief ranging from 30% to 50%, and many also allow you to defer some tax due on capital gains you have earned elsewhere.
You can save tax by investing in joint names, or in the sole name of your spouse. This will allow you to have lower income taxes. When you transfer these investments, you forfeit your rights to them.
Giving to charity, as we saw with David Beckham’s case, is not only tax efficient, but it can also generate tremendously positive publicity which may in turn increase earnings potential beyond the amount given.
Diversify your wealth
Instead of focusing on one asset, you can split your cash among a number of assets. Spreading the risk is a good way to achieve stability and security. Footballers are very fond of investing in real estate. Don’t put all your eggs in one basket.
Give it away!
Some professional athletes have set up their own foundations and trusts. Giving to charity can be tax-efficient, as we saw with David Beckham. It can also generate tremendously positive publicity which may lead to a significant increase in earning potential.
While financial management is a common skill, the options you have can be confusing.
Get some advice
While financial management is a common skill, the sheer number of options you have can be overwhelming. This is especially true if you’re an international player working in the UK or a British trader. It can be worth hiring a professional accountant to help you keep track of your finances. You can contact the trade associations or ask your friends for recommendations if you don’t know one.
You can’t afford to not take care of your money, regardless of how much you earn. Please don’t hesitate to contact me if you have any questions about this letter, or any other financial matters.