As a professional rugby player, the career path in front of you is well-trodden. You will have seen the triumphs of the pros before you, many of which you no doubt seek to emulate. Equally, you will almost certainly have seen the tribulations others have faced that you will hope to avoid.
When it comes to your money, this is much the same. At DBL, we have worked with players in all stages of their career, so we know the financial decisions that often matter most to players, and the challenges you might face.
As a result, this also means we have seen nearly every mistake a player can make with their money.
So, discover three of these common financial planning mistakes, and how working with us can help you to safely avoid them.
1. Not saving enough during your playing career
A common mistake many players make, is not saving money from the future right from the start of their playing career.
When you sign your first pro contract, retirement can be far from your mind. Instead, it can be tempting to spend your money in these days, thinking that you will have time to save for your future later on.
But actually, starting a savings habit earlier on is often a more sensible choice. It gets you into the routine of setting money aside, building a healthy attitude towards your wealth that can help prevent you from wasting it.
Additionally, it allows you to make the most of the effects of compounding, especially in the case of your pension savings.
This example from Unbiased goes to show the power of early saving and compounding interest. It compares two people making contributions to their pension, only one starts saving aged 20 (who we will call “saver A”) while the other starts saving at aged 40 (we will call them “saver B”).
For saver A who starts saving aged 20, they contribute £50 a month to their pension. Assuming an average interest rate of 4%, that means they would have a pension pot of nearly £60,000 by the time they turn 60.
Meanwhile, saver B starts saving £100 a month from age 40. Despite paying in twice as much, they would only have just over £36,500 by age 60, again assuming average interest of 4%.
This is before tax relief is taken into account, too. The example assumes that saver A is a basic-rate taxpayer, meaning their £50 pension contributions actually see £62.50 added to their fund each time.
Saver B, on the other hand, is a higher-rate taxpayer, seeing £166 added to their pot for every £100 contribution.
Yet despite the advantage saver B has here, their pension would still only be worth around £60,600 at age 60, while saver A would have more than £72,800.
So, despite saving smaller amounts and receiving less tax relief, saver A would still have a larger fund in retirement than saver B.
All in all, this underlines the importance of saving as soon as you are earning in your playing career, to maximise all that your savings (and pension, in particular) have to offer.
2. Focusing too much on investment returns above all else
As naturally competitive individuals, rugby players like to win. However, this winning mindset can sometimes set sights on the wrong targets, meaning that you end up focusing on the wrong thing.
For many players, this results in putting all their energy into generating the largest investment returns possible.
The reason this is potentially a mistake is that it might lead you to not prioritise other equally important elements of your investing.
For example, if you narrow your gaze to just the returns on your portfolio, you might end up ignoring elements such as:
- Your risk tolerance, leading you to take on more risk than is appropriate for you
- Diversification, thus failing to spread your investments across various industries, sectors, countries, and regions
- Your emergency fund, putting you in a potentially precarious position if you need money to tie you over in the short term.
Investment returns do matter, and carefully creating a portfolio that achieves what you need is certainly important. But to focus entirely on returns is often a mistake when there are so many more elements to consider as part of your investment strategy.
3. Not considering your goals for the future
Finally, and perhaps most significantly, a mistake that many players make is not considering their goals for the future when planning their finances.
This can also be another outcome of focusing too much on investment returns, forgetting about what really matters.
When you are accumulating and making decisions about your wealth, the reasons that you are doing so should be front and centre. It is all well and good to save and invest, but what are you actually doing it for?
Are you hoping to provide your children or grandchildren with a nest egg in the future? Do you want to travel the world when you are finished working? Or are you solely focused on ensuring financial stability for you and your family?
Whatever your goals are, having a purpose like this can refine your thinking and help you to make better informed choices with your wealth. By building your financial plans around what you really want to achieve, you can be confident that you are well set to reach your goals in the future.
Get in touch
If you would like help steering clear of these common financial planning mistakes, then please do get in touch with us at DBL Asset Management.
We are experts in helping professional rugby players to make the most of their wealth.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
