As a collegiate athlete receiving NIL deals, it is important to have a solid understanding of how to manage your money as a student-athlete. While having this newfound financial freedom can be exhilarating, if you’re not used to handling your money, it can be intimidating and even lead to overspending. We’ve put together some advice on how to manage your money as a college athlete to help you get the most out of your NIL deals.
Disclaimer: This information is made available for educational purposes. It provides general information and is not intended to provide financial advice. This information should not be used as a substitute for competent advice from a licensed expert.
Develop a budget
Step one on for managing your finances is to develop a budget. There are several methods to creating a budget, and your goal is to find a method that works for you!! Here are some budgeting options:
Use an app: Many apps can connect with your bank accounts to track your income and expenses. Mint mobile is a popular option and a great place to start.
Pay yourself first, spend the rest: This is the easiest type of budget. Simply dedicate a percentage of your income to taxes and a specific percentage for savings/investments. Move this money out of your checking account to your savings or investments and freely spend the rest! Many experts suggest trying to save at least 20% of your income.
Try a detailed spreadsheet: Create a spreadsheet to keep track of exactly where your money is going: Record all of your earnings and expenses in one place (you can find tons of budgeting templates online). Include your NIL deals, scholarships, housing costs, daily meals, transportation, leisure expenses, and anything else you may want to add.
Making a budget may initially feel restrictive, but good budgets can actually bring freedom! Budgets can allow you to spend lavishly on the things that truly you value without the guilt. Then, budgets keep you in-check from overspending on purchases you might regret.
Set aside funds for taxes
Any money generated from an NIL deal is considered taxable income. Be sure not to spend all your NIL income before considering taxes!
Prepare ahead of time and set aside a modest amount of your NIL income to help cover your tax payments. The exact percentage will be based on your total annual income, so be sure to predict how much you’ll need to pay.
If you plan to pay over $1000 in annual taxes as a self-employed individual, you’ll need to file estimated quarterly taxes throughout the year.
How to pay estimated quarterly taxes
Consider getting advice from a tax expert to make sure you are following regulations and best practices.
Save
After considering taxes, it’s time to start saving.
Always have an emergency fund
The first place you’ll want to put your savings into is an emergency fund. Set aside 3-6+ months of expenses for stressful times. You can totally save more depending on your lifestyle and what you feel comfortable with. Don’t touch this money unless you absolutely need it!
Just make sure your emergency fund is in a SAFE place, such as an FDIC insured savings account. If you ever have to draw money out of your emergency fund, be sure to replace it before investing or spending on unnecessary items.
Set aside money for your future
The extra money you earn from NIL can create a great savings base for you. NIL provides the opportunity to get ahead of your finances and sets you up for future success.
Safety is an important benefit of savings accounts, but investments provide huge opportunities to grow your wealth.
Once you’ve set up an emergency fund, paid off any high-interest debts (like credit card debt), and saved for relevant expenses, consider investing in your financial future. The earlier you start investing, the more time compound interest has to work for you!
Invest
Luckily, there are ways to sit back and let your money grow.
Thanks to inflation, cash stored in basic savings accounts loses value over time. This means that $5000 today will only be able to purchase less than $5000 worth of stuff in the future. However, investing can help combat inflation. Of course, investing also provides a degree of risk. When you make decent choices, you’re very likely to come out ahead long-term.
Assess your personal risk tolerance and start building an investment portfolio that works for you.
Learn more about investment basics
Consider opening a investment vehicle with tax advantages, such as an IRA (Individual Retirement Account). A Roth IRA is often a good option for college athletes because you pay taxes on the money when you contribute it to your account, and you can withdrawal the funds tax-free later. Be sure to learn the guidelines and constraints associated with these accounts before opening one.
Track your net worth
Net worth = assets – liabilities. In other words, what you OWN minus what you OWE.
| ASSETS – what you OWN | LIABILITIES – what you OWE |
| Checking accounts | Credit card debt |
| Saving accounts | Student loans |
| Retirement accounts | Mortgage |
| Investment portfolio | Car loans |
| Real estate | Other debts |
| Automobiles | |
| Other valuables (ex: jewelry) |
Tracking your net worth is the easiest way to keep track of your overall financial progress. You want it to go up overtime!
You can even use an app like Mint or Empower to track your net worth easily.
Follow up on your contracts
Keeping track of every contract you sign for your NIL deals is crucial. Read deeply into the terms, the timeline, and the payment conditions.
Keep copies of all agreements, and get them reviewed before signing.
Follow this strategy to avoid running into legal trouble in the future. You want to ensure that all regulations are being met from both parties. You must complete the deliverables listed in the contract, and the brand must compensate you accordingly.
Always make sure you get paid, and keep track of when the money lands in your account!
Consider filing an LLC & opening a business bank account
We suggested that you file an LLC for your NIL deals. Although it’s not a requirement, doing so can make you eligible for potential tax benefits and provide a helpful mindset shift.
Then, you can open up a business bank account for your LLC. There are countless advantages that come along with doing so, such as dividing your business and personal finances to help you stay organized.
Consult a professional
It might be difficult to manage your money, especially if you’ve never handled a lot of money before. As mentioned earlier, consulting with a tax expert will only be beneficial. To assist you in managing your money and making plans for the future, think about seeing a certified public accountant (CPA) or financial advisor.
As a collegiate athlete receiving NIL deals, handling your funds requires self-control and a long-term perspective. Contact an expert to lay a solid financial foundation and safeguard your financial future.
You got this!
Overall, these tips will keep you organized and moving toward your financial goals. Earning more money certainly brings more freedom, but it also adds more responsibilities to the table.
With the additional money from NIL offers, it can be tempting to spend on opulent products and experiences. Yet, it’s crucial to keep to your spending plan and avoid going beyond. Prioritize necessities, such as taxes, savings, housing, food, and transportation before balling out!
