When an athlete enters the professional sporting world it is essential that their financial needs and general financial status are looked upon by either accountants or financial advisers in order to produce the best outcome for the athlete in question. With their monetary status being kept under surveillance by professionals the athlete can concentrate on their career and keeping up a good income. An accountant takes care of the day to day administration tasks that need to be completed.
They can be hired over a period of time or they can be a contracted member of staff for more long term periods. Financial advisers offer advice on investments that can be made and general financial situations for a fixed fee or commission on the end product of the investment. The six key sources of income for a professional athlete are shown below:- Investments are when money is put into a company, project or item in order to hopefully return a profit. An example of investment could be in properties.
They can either be developed to return a profit or the investor can wait simply until they increase in value. Investment is a long term form of making money as it more often than not, requires a certain amount of time. Saving accounts can also be a form of investment as interest can be gained. Stocks and shares can also be a good form of investment but there is always a gamble. Should the product or company you are investing in for some reason fail or depreciate in value it can cause money loss.
This is why it is wise to have a financial adviser to guide you on just how much money you should put into something like that taking the minimum possible risk but at the same time trying to find a source of income. Another form of maintaining a good financial status is to claim expenses back from the organisation or employer that you are performing/working under. Expense is the money spent as a result of your job, for example fuel costs, depreciation of the vehicle you are using, residential costs and meals away from home.
This can be reclaimed by completing monthly paperwork stating how much your expenses have come to. Insurance is essential for a professional sportsperson. It should be taken out in case of any unexpected occurrence that could disable the athlete and prevent them from working. Anything that could potentially lose the athlete money should it become damaged, lost or stolen should be insured; a vehicle obviously being a legal requirement. National insurance is also important for any injury that could occur at work. It entitles the athlete to sick pay.
Life insurance is also essential when in a career that involves a lot of strenuous activity. It protects the athlete should a sporting injury occur that causes disability or affects the individual’s life. It can even insure them against death in their job or any place. When in the sporting world and under media attention, royalties can also be a good investment. Lending your name to a product can allow you to either claim an up front fee from the company or organisation wishing to use your name or face, or claim a percentage of the sales without a time limit.
This does not pose a risk to you as you are simply gaining money and have no chance of losing any, but depending on how well the product sales go you could either make more money from an up front fee or having a percentage of the product sales. Should you receive an up front lump sum payment and the product sales do not go as well as planned, then it is to your advantage and is more profitable than if you decided to claim a percentage of the product sales. However if you claimed an up front fee and the product sales rocketed you may have lost out on a huge potential profit.
Projects like this can also highly increase your profile and increase the potential profit next time a royalties project comes up. After the income of the professional athlete, there always expenses to be paid out. These involve tax or debts, and pensions. It is a legal requirement that everyone in the UK pays income tax. The amount they have to pay varies depending on how much they earn. The more a person earns, the more you are forced to pay in tax. Should the athlete live alone they can claim a “single persons allowance”.
This is where the person can receive deductions from their taxes such as council tax as they are single and this can benefit them. VAT is another form of tax that must be paid by everyone on most products such as cigarettes, alcohol, and fuel. This is less likely to affect an athlete as they are not as likely to drink or smoke. However fuel costs can affect an athlete as they will find the need to travel a lot for their job. Another expense that athletes can have is pensions. This is purely for security in the future.
Some people choose not to take out a pension and live on government pensions. These people can rely on investments they have made earlier in life such as propertys and rental income to support them through their older years. Some athletes could choose to take out a private scheme but this involves premiums and conditions and extra costs. Most people retire at 65 or 60. It is not compulsory to retire but that age is when you are entitled to your state pension from the government.