Financial education and financial goal setting for athletes.

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Managing personal finances as an athlete is as important as stretching before an event. Learn how to plan for the future with our financial education tips.

The Olympic Games are often seen as a beacon of hope and optimism for people across the world. In the year preceding the postponed Tokyo Olympic Games, we worked with the  Australian Olympic Committee(AOC) to help Olympians prepare for life during and after competition. Supporting the AOC’s Opportunities Program as the Financial Literacy partner, Westpac's Davidson Institute  helped create ‘financial essentials’ education tools in collaboration with past Olympians and financial experts to support professional athletes with everything from getting on track with money management, staying on top of debt to learning how to save for a house.

Often the commitment and dedication that athletes give to their sporting endeavours is not the same when it comes to their personal finances. There may be an assumption that some young athletes in elite sports enjoy a lavish lifestyle with high earnings, however the impact of a lack of basic financial knowledge has resulted in a substantial number of athletes making financial mistakes. Further, athletes may finish their careers in sport and only then consider seeking out financial help or financial advice from a financial advisor. It is comparatively rarer for them to give much thought to their life “after sport.” Down the track, this may create serious difficulties, both financially and emotionally.

An athletes’ earnings in their chosen sport can be very volatile. Often athletes’ salaries are not fully guaranteed and their capacity to earn may be adversely affected by poor performance, injuries, sponsors interest in their sport and off-the-field behavioural factors.

We believe that through financial education, all sports persons can gain a sound knowledge about money and personal finances and give them the confidence to make good financial decisions.

Getting started

If you’re an athlete or a sports person that is ready to get your finances in order our Financial Fitness course is a great way to get started. It covers the basics of personal finance topics to help you understand key financial concepts and establish good money habits to work towards your desired financial future.

Setting financial goals

Being an athlete involves setting clear goals regarding training and performance. Having clear financial goals is equally important - not only so you have a plan for unexpected costs and emergencies, but to help you become financially fit for your life beyond sport.

A financial goal details:

  • What you plan to accomplish.
  • The resources you'll need to make it happen.
  • How much time you'll need to make it happen.
  • How you plan to work your goal into your budget.

No matter what your vision is for your financial future, it helps if your wealth management goals are SMART.

  • Specific – leaves no doubt about what your goal is. A specific goal will allow you to see when you have been successful.
  • Measurable – you want to be able to see the fruits of your labour. If you can’t measure it, you may never know if your goal has been achieved.
  • Actionable – you should be able to take practical steps or actions to achieve your goal. This is really asking you what you plan to do differently to achieve your goal.
  • Realistic – if your goal is not realistic, you may never achieve it and you may become disillusioned.
  • Time-bound – if there is no timeframe around the goal you may keep saying “I’ll start tomorrow”. By putting a time frame around it, you will be able to track your progress.

Tips to get started on financial goal setting

Being an athlete involves setting clear goals regarding training and performance. Having clear financial goals is equally important - not only so you have a plan for unexpected costs and emergencies, but to help you become financially fit for your life beyond sport.

Here are some tips to get you started to think about the big and small things when you’re writing out your goals:

1. Build and stick to a budget.
Budgeting is a foundation on which other money goals can be built.

That’s because a budget helps you plan for how to use your money. It represents a financial plan for what’s coming in (income) and what’s going out (expenses). Budgeting puts you in control of your day-to-day spending and financial future by making you more aware of where your money is going. Our cost-cutting checklist provides some things you can consider right away to help reduce your costs.

2. Build up an emergency fund.
You never know when the unexpected can happen. An emergency fund could be just the safety net you need. It helps you to be prepared for any future money problems if you’ve got money saved up.

Whether it's your phone, appliances or unexpected medical bills, some things you might be able to do without, but others not. A good way to size how much you should budget for is by taking a look around your home to see what you might need to repair or replace (keeping in mind that repairing can cost as much as it does to replace sometimes) or by speaking to some of your friends or family members that have had unexpected medical costs. Then you should have an idea of how much you should be aiming for in your emergency fund for these unexpected expenses.

Although we've all got different needs, as a rule of thumb, aim to have $500-$1,000 put aside for short term, unexpected expenses. Saving just $10 a week adds up to over $500 in a year. Even if this isn't enough, having this much spare could go a long way when you need it. The trick is to get started and make regular contributions from your cash flow to your emergency fund.

3. Get out of debt.

Feeling overwhelmed by credit card debt? Fear not. Getting on top of your finances and putting together a plan to get back on track is easier when broken down into simple steps.

  • Add up your credit card and store card debts to know how much you owe.
  • Stop adding to your debt.
  • Pay more than the minimum amount.
  • Set up a repayment plan.
  • Think about consolidating your debt with a balance transfer.

4. Spend less than you earn.
It sounds easy – to live on less than you make. With any money that remains you can use it to cover saving, getting out of debt, and building wealth. These are all things that help you get ahead financially and move forward.

Getting this right means becoming more intentional on your spending. It’s a practice and a mindset to spend consciously, involving finding deals, using debit cards or cash and learning to say “no” to things that you don’t need.

5. Saving money to pay for large items.
Furniture, computers and technology items - these can be larger purchases.

One key game-changer in the psychology of money is the mode of payment. Using your own money, either in cash or via debit card, in hand to pay for these items—in full—is a goal to consider when financial planning. This puts you in the driver’s seat, steering you toward owning things rather than owing for things.

You’ll save money paid on interest by paying for purchases during the interest free period on your credit card. This is the period of time in your credit card billing cycle when you make purchases without being charged interest. For example, if you made a purchase on day 1 of a statement period, you could have up to 55 days to pay it off before interest is applied to the balance. Always check the credit card features before committing to purchases using this method, as credit cards can vary in what they offer their customers.

6. Pay off your home.

If you’re a homeowner, you’ll likely know that real estate prices are at a premium these days. The Australian median house price has more than tripled in the past two decades. And because your mortgage is the largest debt you’ll ever face, it makes sense to tackle it, if you want to take control of your financial security.

Do you want to pay less interest on your mortgage, pay off your home loan sooner or just get a return on your savings? By paying more than the minimum repayments on your home loan you could achieve this. However, if you want to be able to use those extra repayments on your home loan in the future for renovations, investment management, school fees, everyday expenses or something else, then an offset account or redraw facility may be right for you.

Mortgage interest is calculated daily on your outstanding balance and charged monthly by most lenders. If your outstanding balance is reduced for only one day your interest will also be reduced. The extra repayments in your redraw facility or funds held in your offset account effectively reduce your outstanding balance for interest calculation purposes. This means if your salary is only available for one day before it is used, it could reduce the interest you pay on your mortgage if you put it into your loan account or an offset account.

Now, take a moment to imagine getting about 25% of your income back to spread out over your savings accounts, travel fund, home-improvement bucket list, and superannuation. That’s probably will happen when you pay off your mortgage. That’s why this is a great goal. It may take time, but the payoff is more than worth it. To help you get there sooner, ask your bank for a better rate or check to see if there are more competitive rates in the market.

7. A comfortable lifestyle in retirement.
It may seem like your retirement may be some time off in the distant future. Notwithstanding, setting retirement planning is a great starting point to set you on the right path for how you aim to live the later years of your post pro athlete life.

You can find out how much super you have now. Next project how much super you'll have when you retire, and if it will be enough to fund the lifestyle you want.

A retirement income calculator shows the sort of annual income you may have in retirement, and the big difference even small extra contributions could make to your super.

 

This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.

 


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Lali Wiratunga

Lali Wiratunga believes in encouraging positive financial behaviours to boost people’s financial confidence. He also advocates for the role of innovation, creativity and entrepreneurship in helping people and organisations deliver social impact and financial sustainability. In 2016, Lali was recognised for creating a positive impact through Pro Bono Australia’s Impact 25. Following a career as a corporate lawyer and management consultant in the UK, he's had 14 years experience in roles across financial services in Australia. He has served in the community as a Board member of a disability services organisation, and is a member of the Alumni Advisory Board at UNSW Business School, where he mentors students and advocates for the value of business education.

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