It’s a common misconception that professional athletes such as professional football players don’t have to deal with financial strains that many average people face on a weekly basis when their paycheck comes through and the bills are sitting on the table. A recent article posted on the NFL Players Association website brought to light a situation that I never thought existed.
The average player coming into the league just out of college starts at $285,000 a year and after taxes and deductions they round that figure down to about $147,000 a year. One thing that surprises me is that many of these players are financially struggling during the off season because they only get paid 17 weeks out of a 52-week year, and stretching that money gets more and more difficult as time goes on. One of the main reasons is that these players have never been required to budget such a large amount of money, so they go on spending sprees and other frivolous endeavors. When it comes time to live during the off-season, they find themselves in financial trouble.
The article discusses creating a cash flow plan for these players which would break their finances down into two different types:
- Sure Money- the player’s salary
- Extra Money- profit gained from endorsements, league bonuses, and any other cash not gained directly from their league check.
The article further explains that the “sure money” account would be broken down into four separate accounts with the player’s bank. The first account would be the holding account where the money is originally deposited. From there, the money would be broken down into:
- Operating Account: all money for bills and personal spending would be filtered into this account.
- Major Expense Account: property taxes, insurance, etc. would end up in this account.
- Emergency Account: 3-6 months salary that is saved up so that all bills could be covered in the case of an emergency.
The article also discusses the basic budgeting premises that many of us have come to be familiar with. This includes developing a budget that allows you to live within your means, as well as being able to put money away for times when you many not have an income. This is especially important to the NFL player outside of that 17-week season when a paycheck is coming in regularly.
According to the article, many players will take their extra money and blow it on things that may not be necessary instead of saving it or putting it in to smart investments that will help them continue to live the comfortable lifestyle that they’ve become accustom to when they retire.
The article discusses how taxes would affect these incoming finances, oftentimes with a 50% tax. “1 Million dollars quickly becomes $500,000″ and it would help if that money was put into an investment vehicle in order to get more benefit from that money.
This article stunned me in that I never considered that a professional football player would have the same problems as Average Joe when it comes to finances simply because of the pay schedule they’re in. When you stop and think about it, you have to realize that proper budgeting and financial management is not just a skill that comes easier when you have more money; it’s a skill that must be learned, and one that must be practiced throughout the course of your career.
Back in December, I wrote an article on my switch to Skype for my calls made while at my desk, to cut back on the number of cell phone minutes I was burning through each month. After calculating savings, I realized I was saving $631.70 per year by going with a VoIP provider as opposed to Verizon. At the time I was using a headset connected to my desktop. Since then, I’ve gotten a bit more technologically advanced.
In speaking to a friend recently about credit cards, mortgages, and personal finance, he confided that he had very little knowledge of most things finance related. The question he eventually asked me was “What is the difference between secured and unsecured debt?” Since I feel the answer could benefit more than just my friend, I decided to post it up here for all to see.
