As student-athletes begin to earn money through Name, Image, and Likeness (NIL) deals, effective budgeting becomes a crucial skill to ensure long-term financial health. The transition from being a student with limited resources to managing a newfound income can be overwhelming. Here’s a comprehensive guide on how student-athletes can create a budget that works for their unique circumstances while maintaining their financial well-being.
1. Understand Your Income Sources
The first step in budgeting is understanding all sources of income. For student-athletes, this can include:
- NIL Deals: Income from endorsements, sponsorships, and social media promotions.
- Scholarships: Funds that may cover tuition, housing, and other educational expenses.
- Part-Time Jobs: Income from any part-time work outside of athletics.
- Financial Aid: Grants and loans that contribute to overall funding for education.
By identifying all income streams, student-athletes can get a clear picture of their financial situation.
2. Track Your Expenses
To create an effective budget, student-athletes need to track their expenses meticulously. Common expenses may include:
- Tuition and Fees: Direct educational costs.
- Housing: Rent, utilities, and related expenses.
- Food: Grocery shopping and dining out.
- Transportation: Gas, car payments, or public transport costs.
- Training and Equipment: Expenses related to sports, including gear, travel, and training.
- Entertainment and Miscellaneous: Spending on leisure activities, shopping, and social events.
Using a spreadsheet or budgeting app can help keep these expenses organized and accessible.
3. Create Budget Categories
Once student-athletes have a clear understanding of their income and expenses, the next step is to categorize their budget. Common categories include:
- Fixed Expenses: Regular, unchanging costs such as rent and tuition.
- Variable Expenses: Costs that can fluctuate, like groceries and entertainment.
- Savings: A portion of income set aside for emergencies, future expenses, or investments.
- Debt Repayment: If applicable, allocating funds to pay down student loans or credit card debt.
By organizing expenses into categories, student-athletes can see where their money is going and make informed adjustments.
4. Set Financial Goals
Establishing short-term and long-term financial goals can provide motivation and direction for budgeting efforts. Goals may include:
- Building an Emergency Fund: Aiming for three to six months’ worth of living expenses saved for unexpected situations.
- Paying Off Debt: Setting a target for when certain debts will be paid off.
- Saving for Big Purchases: Planning for larger expenses, like a car or graduate school.
Having clear goals helps student-athletes prioritize their spending and stay focused on their financial journey.
5. Implement the 50/30/20 Rule
A practical budgeting guideline is the 50/30/20 rule, which suggests dividing income as follows:
- 50% for Needs: Essential expenses such as rent, food, and utilities.
- 30% for Wants: Discretionary spending on entertainment, dining out, and hobbies.
- 20% for Savings and Debt Repayment: Contributions to savings accounts and payments on debt.
This rule provides a straightforward framework for managing finances and can be adjusted according to individual circumstances.
6. Monitor and Adjust Regularly
Budgeting is not a one-time task; it requires regular monitoring and adjustments:
- Review Monthly: Regularly reviewing expenses against the budget allows student-athletes to identify areas for improvement and make necessary changes.
- Adjust for Changes: Life circumstances, such as changes in income or unexpected expenses, may require budget adjustments. Flexibility is key.
7. Seek Professional Advice
Student-athletes may benefit from seeking guidance from financial advisors or mentors who can provide insights into budgeting and financial management:
- Workshops and Seminars: Participating in financial literacy workshops can enhance budgeting skills and provide valuable resources.
- Consulting a Financial Advisor: Professional advice can help student-athletes navigate complex financial situations and develop personalized budgeting strategies.
Conclusion
Budgeting is a critical skill for student-athletes as they transition into the world of NIL earnings. By understanding their income sources, tracking expenses, setting financial goals, and implementing effective budgeting strategies, they can achieve financial independence and security. With a well-structured budget, student-athletes can focus on their academic and athletic pursuits while ensuring they are prepared for future financial responsibilities.
Pat Brown, MBA
Financial Advisor and Former D1 Football Player