Financial literacy is beneficial for young and older athletes alike. Knowing your finances will give you an extra boost to further your career and personal life. For athletes, especially, wealth can instantly become a blessing and a curse.
Immediate wealth can only be a curse if one cannot manage their finances well. This is why wealth management for athletes can be key for athletes to manage their careers well.
If you wonder how managing finances can shape your life, read on.
Why is Financial Literacy Important for Athletes?
Many athletes need to gain the necessary skills for monetary management. Juggling between studies and career can be enough distraction. If they are given further financial responsibilities, it can burden them.
The athletes not only possess quick wealth, but they are also eligible for several scholarships. If they can enable it properly, they can retain substantial amounts.
Often, during retirement, older athletes consider transitioning from sports to businesses. This is when they need to invest their time in career transition planning. With proper education with workshops and seminars that focus on managing finances, high-profile athletes will experience a smoother transition after retirement. Here are other reasons why financial literacy is important:
- Assure prolonged financial stability
With a proper understanding of their monetary ambitions, professional athletes can weigh out the profits and losses their financial decisions can bring. By predicting the losses, they create better financial habits and gain long-term stability.
- Stronger credit score
A strong credit score will set your path for new ventures. A strong credit score will make the process smoother if any athlete considers transitioning from sports to business or any other career path. Not only in career transitions, but a good credit score also affects the interest rate of any investment or amount of loan. A poor credit score between 300 and 600 can be charged with higher interest rates.
- Prevention from fraud and scammers
There are ample financial scams and frauds ready to capture confused individuals. Older professional athletes without proper knowledge of athlete retirement strategies often fall prey to these scams.
- Gain financial independence
For athletes interested in gaining monetary independence, several financial literacy workshops focus on these topics.
Strategies Implemented for Managing Finances
Like student-athletes, professional athletes often make mistakes around finances. They need help with taxes, credit scores, savings, and other obligations. This is why they must follow certain strategies regarding their sports career wealth planning.
- Financial Planning and Goal Setting
Regardless of how quickly athletes can earn money, high expenses can result in the loss of large sums of money. Planning while keeping a goal in mind is vital to prevent this loss. Creating a plan can depend on several conditions, including contract details, their fame, their performance, and which sport they play. For example, older athletes who are about to retire can indulge in retirement planning for athletes.
Financial planning should consider the concepts of liquidity, safety, and growth. Liquidity entails the surety of always having liquid cash or cash in hand. Safety ensures the protection of your finances, whereas growth is the maturing of your finances.
- Tax-Minimizing Strategy
Tax management is one of the important athlete investment strategies to have. It helps the athletes to preserve more of their earnings. Minimizing tax can seem complicated, but following simple guidelines can be done easily.
Choosing a domicile is an important step. Check if the home state of the team you are playing for has tax advantages. If not, you can consider moving to a no-tax state.
It is also important to learn how you are taxed on bonuses. Remember that if you sign any bonus, it is only assigned to the law of your home state, and you will be taxed accordingly.
- Choosing a Financial Advisor
For professionals with busy schedules, money management in sports can get tricky. In these cases, choosing the best financial advisor saves time and effort. Experienced advisors are also professionals in this field, which will further prevent more mistakes.
The right financial advisor will speak efficiently to salespeople, estate planners, tax planners, and others on your behalf. However, discussing their compensation before receiving their service is suggested to avoid complications.
Also read: Developing financial literacy in kids: Tips for parents
- Making Proper Investment Choices
Poor investment choices would be a bane to all the intricate planning done so far. One wrong step can lead to a major loss. To prevent this, athletes must be aware of their investment choices. Several investments can seem promising at first glance, but the decision must be made after careful consideration.
Before making an investment, risk factors, growth potential, safety, and other essentials must be thoroughly checked. You must seek the guidance of your financial advisor to make sound choices.
- Planning for Charity or Inheritance
Like many other renowned athletes, if you are also looking to donate your money to a charity of similar agencies, weigh out your favors first. Research the charity you are interested in and ensure their values align with yours.
You can also plan to save money for your upcoming generations. You can carry out legacy planning by creating trusts or inventing in estates.
Concluding Thoughts
Athlete or not, everyone must possess some financial understanding to navigate life. It is important to plan your goals and assess earnings and expenses accordingly.
Like in any other situation, balance is key. However, knowing where the balance stands is important without proper knowledge of wealth management for athletes. Due to poor investment choices or needing more savings, professional athletes can stay caught up on their finances.
To prevent this, several financial literacy programs, seminars, and workshops are set up specifically for such athletes. To attend, you must research if your hometown hosts such workshops. Otherwise, there are also online programs that you can attend from the safety of your home.
