Athlete Financial Planning: 5 Budgeting Methods for Professional Athletes

Athlete financial planning has many components that affect a player’s future finances and security. One part of financial planning for athletes is creating a budget as a means of tracking and controlling expenses. While this may seem like a low priority for busy professional athletes, a regular financial discipline can bring long-term results just like daily training and practice in sports.

Why Do Athletes Need a Financial Plan and Budget?

Professional athletes need a financial plan and budget in order to maximize the amount of income allocated to savings and investments. This is especially true for younger athletes that may see their large paychecks as a windfall, and an opportunity to spend freely. Spending is reasonable, but it should be within the confines of a well-thought-out budget.

Athlete Financial Planning 101: How to Create a Budget

Athlete financial planning and creating a budget is a fairly methodical process when getting started, and includes the following steps:

• Assess your income. Income is the starting point and should be assessed using the annual projected income. If income increases or decreases in future years, the budget can be adjusted.

• Understand your taxes. By projecting annual income you will know your tax bracket after deductions. It’s essential information because the tax rate can reduce your gross income by 30-50%.

• Calculate your expenses. All current, known expenses will be calculated next. One-time expenses such as a vehicle or vacation should also be included in the year it is paid for.

• Determine your financial goals. Some athletes might have a goal of simply covering their expenses with monthly income. But ideally, financial goals should have a longer time horizon for saving and investment, personalized to age and earning level.

5 Budgeting Methods for Professional Athletes

There are a few accepted budgeting methods that athletes can use to guide their planning:

1. 50/30/20 Budget

This is a simple percentage allocation of after-tax income. 50% is for necessary expenses like housing, food, and transportation. 30% is for discretionary spending, including vacations, dining out, gifts, and personal care. The final 20% is allocated to saving and investment under the guidance of a financial advisor for athletes.

2. Pay Yourself First Method

If you want to focus on savings, then you can decide what amount or percentage to set aside each month. You would ‘pay yourself’ first before meeting other monthly expenses. This is the best way to ensure that you are budgeting with an eye toward the future. For new athletes, one approach would be to immediately put any signing bonuses into investment accounts, and then use the monthly salary for expenses.

3. Envelope System

For athletes who need to limit their spending, the envelope method can work well. It's a simple method of creating a cash limit for an expense, like groceries or entertainment, and putting the cash into an envelope. Then once the cash is gone, no more can be spent. There are apps that duplicate this system without the need for actual envelopes. Some expenses like a mortgage are usually not paid with cash, but an athlete could use this method for categories like personal shopping, entertainment, or helping friends.

4. Zero-Based Method

Detailed planners might take to this method, where each expense item is logged and deducted from income until it hits zero. This can be combined with the pay yourself method so that excess income isn't just spent. Simply writing down each expense creates more awareness of spending patterns, which can be a good discipline for athletes that travel or socialize frequently.

5. Value-Based Budget

This budget is more personalized to suit your preferences. You can create a plan where items you value the most are allocated a greater percentage of your income. At the very least, you won't spend as much on activities that are not really important, and savings can be included as a valued item. An athlete might value assisting family members more than buying luxury items, so financial help would have greater weight in their budget.

Create a Sustainable Budget and Lucrative Financial Plan

Premier Sports Network takes a comprehensive approach to athlete care, which includes budgeting and athlete financial planning. We partner with sports financial advisors that help an athlete select the optimal budget method, freeing up income for longer-term investments. Success as an athlete doesn't automatically translate into economic security, and we are committed to supporting a player’s financial life.

Contact us to learn more about how our financial partners can work with you during a prosperous career while securing the future for your family.