Budgeting money as an athlete may be THE most fun thing you will read about in your lifetime. Experts have said budgeting is (not really) the most fun thing to do as a past time.
Okay while that may not be entirely true, budgeting money definitely provides some major benefits. Some of which include:
- Better Control Over Money
- More Freedom From Money
- Peace Of Mind
- You Give Yourself A Raise
- More Opportunities For Financial Growth
While these are some of the big reasons to budget money, there are a few smaller reasons throughout this post. I have always been a frugal individual and constantly look for ways for my money to make more money. So this post is very near and dear to my heart.
Budgeting is one of the primary ways to build a solid foundation for wealth. Personally, it needs to be taught to everyone for the betterment of their lives. Athletes especially need it since they are either on scholarship or paid so much they don’t ever pay attention to their bank account.
We will talk about what budgeting is, how it benefits you as an athlete, and how you can start to do it. Feel free to read the information that fits your needs.
Who budgets money?
According to credit donkey, well over 60% of American’s prepare a budget. Many may know how to do it, but few actually do it. This does not sound good given the majority of American’s work so hard but they don’t keep their money.
People who budget are the one’s who find themselves in a better financial situation than those who don’t.
Many successful people throughout history earn millions of dollars but often times they lose it all within a few years. This post is dedicated to the one’s who want to learn how to keep it.
How to budget money
Budgeting money is actually very simple. There are so many different methods for it, but I will keep it super basic for someone who just wants a foundation.
- Determine what are needs & wants & your investments
- Come up with an easy plan for putting the money in “buckets”
- Commit to the plan
While there are many more parts to these bullets, I will keep it simple for now.
Determine what are needs, wants, & investments
The first step in developing a budget is to find out where you will be budgeting your money. (seems simple enough) If you are like the average person, you are spending almost all of your money on materialistic things (fancy cars, clothes, shoes, jewelry, etc) and want to look rich.
Trust me, in the moment, those fancy cool things are great but don’t you want to have wealth that can give you all of these things forever in just a few years?
So, sit down, and write out NEEDS, WANTS, INVESTMENTS on a piece of paper:
We’re then going to write out which category our expenses fall into. More details below.
Needs are your necessities; rent, food, water, insurance, phone bills, or other things that NEED to be paid monthly.
For many people, their mortgage is 30-50% of their monthly expenses. For the average college athlete, they may not have a mortgage, but they may rent. Which is also a big expense assuming they don’t have a high paying job currently.
Wants are basic things you can go without: restaurants, drinks at the bar, nice shoes, nice clothes, jewelry, video games, netflix, etc.
Investments are the things which will give you more money in the future: stocks, real estate, CDs, Bonds, P2P Lending, etc.
For many who do not have a proper investment location, ACORNS automatically invests your spare change that is left over from purchases to the nearest whole dollar. (if you buy something for $2.84, it will invest the remaining $.16 into stocks which will grow your money for you.)
I have used this for over a year and have made over $1,500 just from my spare change.
Come up with an easy plan for putting the money in “buckets”
After writing out our needs, wants, and investments on paper, we’re going to create 3 bank accounts for the different expenses. You would name each bank account according to the expense you get.
We will then create a formula for how much and when to use these bank accounts.
The 50/30/20 Formula
50/30/20 represents an allocation of funds in order to balance out personal desires. It would look like this:
When you get paid, you put 50% of your money into the NEED bank account, 30% into the WANT account and 20% into the INVESTMENT account.
Therefore, you can relax knowing that your bills, wants, and future is covered.It now becomes an automated system for creating wealth.
When to start budgeting your money
Well, now would be a pretty good place to start…. Every day you wait is another day without peace of mind about your finances.
And the longer we go without peace of mind, the more stressed we get.
Practice good habits of budgeting money and watch your success go up as a result.
why budgeting money is important
Budgeting money is important not only for athletes but for everyone. Budgeting Money:
- Create raises
- Gives you more freedom
- Gives Peace of mind
- Provides happiness knowing where your money is going so you don’t feel restricted
When we budget, we tell our money where it should go, not the other way around. Since 75% of NFL athletes go broke after 5 years, it makes sense to ask, how does that even happen?
Well, sometimes athletes come from humble beginnings where they didn’t have a lot of money and all they had were sports. So when they get these big time paychecks, they want to go and buy everything they can because they’ve never had it before.
Unfortunately, the money stops coming in if you’re an athlete without investments and budgets.
That is why Budgeting Money is so important!! If done properly, you can still buy your nice shoes, (if it fits the budget.
Now, if you can hold off buying nice clothes, cars, and jewelry now, and just wait for a few years when your investments start bringing in some serious money, you can buy way more than you can imagine.
That’s why I like to do 50% needs, 30% investment, and 20% wants.
If I can sacrifice some short term desires for a few years, then I can get much better “toys” in the future. (Delayed gratification 101)
Apps to budget money
There are plenty of websites, apps, and books that budget money. A few good one’s are:
- Every Dollar
- Personal Capital
From my experience, the easiest to start was “Every Dollar” due to its simplicity. They each have their own benefits, but Every Dollar was simple enough to start up in 20 minutes or less.
All you need to do is figure out your fixed costs, (rent, insurance, car payments, etc) figure out how much you’re going to be paid, and the rest is a trial and error thing as you go throughout the months.
After about 3 months, you will start to see trends and patterns of your spending. This will show you what you’re spending most of your money on.
A good tip would be to take the excess of categories you’ve cut and add them to debt. The faster you take out debt, the closer you are to financial freedom.
Please take this seriously as your future can be what you want it to be with the right plan in place.
Write out your wants, needs, and investments. figure out how much you’re making per month, figure out your fixed costs (amount you HAVE to pay monthly like rent, insurance, car payments)
Then download the app Every Dollar, (or others like it) and start entering in this data.
you can guesstimate your want expenses like haircuts, bars, personal care etc.
Eventually, you will find that you have a leftover amount of money to put somewhere. Personally, I would put it toward debt payments (if you have any) If there’s no debt, put into an investment account like ACORNS. (we both get $5 when you sign up for free)
Then once you figure out and make the budget equal 0, stick to it and be disciplined.
As athletes, we are known for being disciplined so please don’t let me down.
While I know this is a lot of information, I would greatly appreciate feedback to see how much this helped you and let me know if I should include something and i’ll do my best.
Also, let me know if there is something in particular you would like to see for another post and i’ll make it happen!
Thanks for reading and stay amazing!