How to avoid bankruptcy in football

It might be surprising that someone who has played for one of the biggest clubs in the world finds themselves in such a position. However, his case is more common than you would think. Despite the high salaries and endorsement deals that come with playing football at a professional level, a significant number of players struggle to manage their finances and fall into financial trouble once they retire.

Around 40% of players go bankrupt in retirement, which emphasises the scale of the problem within football. Most notably, players like Craig Bellamy, Jermaine Pennant, David James, Brad Friedel, John Arne Riise, Paul Merson and Paul Gascoigne went bankrupt at one point in time. While it’s not clear why Wes Brown succumbed to this statistic, there are some key steps that players can follow to avoid facing a similar fate.

Stick to a budget

One of the main reasons that players run into financial difficulties is that they spend too much and live beyond their means. Creating and sticking to a budget is crucial. Often we will conduct an analysis of a client’s bank statements to ensure they know exactly what they are spending. It’s vital that players know this information as we can then use forecasting software to highlight if their spending is sustainable in the long run.

Often we will challenge players and explain that they are spending too much, but many players simply aren’t aware that is the case in the first place. Premier League wages might make a player feel like they could never run out of money and that their card won’t bounce no matter what they buy. However, the reality is that players only have a finite amount of money, just like everyone else!

Create a life after football fund

Players must invest any surplus income wisely, as the vast majority will be reliant on the savings and investments they can build up during their careers once they retire, estimated to be 35 for most players. It is unlikely that their post-football earnings will match what they have earned during their playing career, so players must build a ‘life after football fund’ to provide them with a retirement income.

Players are often obsessed with investing in property, but this can be inefficient from a tax perspective and inflexible in that you are limited to the rental income a property produces.

Alternatively, players may look at investing in individual companies, which can expose them to unnecessary risks. There is a whole list of companies set up by players which have gone bust, which highlights this danger.

There is no ‘get rich quick’ scheme or ‘silver bullet’. Instead, a diversified portfolio of stocks and shares, with a high equity weighting, is ‘tried and tested’ to grow and protect a player’s wealth. Importantly, this strategy will allow players to have liquid assets and cash flow in retirement to replace their football income. Starting early and investing regularly is key.

Be debt-free by retirement

Achieving a debt-free retirement may seem like a straightforward goal, yet many players still find themselves struggling with debt once they retire. While players are often able to afford large mortgages during their playing career, the monthly repayments can become unmanageable when they retire or as their wages fall in the twilight of their careers.

Therefore, it’s advisable to try and pay off as much debt as possible during an accelerated period. For instance, many mortgages allow for a penalty-free payment of up to 10% per year towards the outstanding balance. With large appearances, goals, loyalty, signing on fees, promotion bonuses etc, there is no reason why a player can’t be debt free by the time they finish.

Put your own needs first

Players often overstretch themselves and support their family and friends financially. For many players, this can feel like an amazing thing to do for those who have been so supportive to their careers. But often, this is done at the expense of their own financial needs and objectives. This feeds on from the previous point that players only have a finite amount of money. Buying a car or house for someone else or supporting someone financially might be too generous if they are going to suffer because of doing so in retirement. It’s vital to ensure that they are on track financially first before helping others.

Focus on what you might do next

Playing careers are short, and retirement from the game is a certainty, yet when you ask the majority of players what they will do once it’s over, they say, ‘I don’t know’. It’s essential to consider what their retirement actually looks like and ensure they are prepared for ‘life after football’. Not every player can be a coach or a pundit, but many are successful in other careers and able to transition their skill sets to other industries.

Often players make the mistake of trying to ‘buy’ a career once they retire, by investing large amounts into businesses or schemes that inevitably fail. The reality is that the best preparation for life after football is by obtaining relevant experience, training and/or qualifications. Post-football income can really help to take the pressure off the income that is needed to be generated from a player’s ‘life after football’ fund.

Aside from the financial implications, retirement from football can be tough mentally. Players often don’t have a purpose or drive in retirement, so it’s key to look at how retirement will be spent. Playing golf every day might not be as appealing as it sounds!

Professional advice

Players are regularly targeted by unscrupulous individuals or scammers looking to take advantage of them and make a quick buck. This makes it easy for players to fall victim to fraud or mismanagement. Seeking professional financial advice is crucial for footballers to give them financial education to allow them to make informed financial decisions and be proactive with their finances.

Given their short careers, players can’t afford to make financial mistakes as often they won’t have the career span to recover and put things right. A player in their mid-thirties might not have the luxury of being able to continue playing in the same way that a person in their sixties might be able to continue working in a ‘normal’ job.

At LIFT-Sport we specialise in helping professional footballers achieve their financial goals. We know the unique challenges and opportunities that come with a football career, and we can help you make sensible decisions with your money. Get in touch today if you could benefit from the experience of our team.