In traditional careers, your income often rises steadily over several decades as you build experience in your field and acquire professional qualifications.
For example, according to Fidelity, the peak salary for the average person is at age 47. Earnings then level off and often decline as you get closer to retirement.
However, professional sportspeople typically earn most of their lifetime income within a compressed period.
Indeed, research for ISAKOS (International Society of Arthroscopy, Knee Surgery, and Orthopaedic Sports Medicine) confirms that most professional rugby careers last between 7 and 13 years.
This means that the 10-year earnings window between your early twenties and early thirties represents a unique financial opportunity.
It also means that the financial decisions you make during your playing career carry far greater consequences than they might for someone looking at a career lasting four or five times as long.
Recognising the value of your own window and managing it effectively can create long-term financial security that lasts well beyond your playing days.
Here are some important ways to achieve this.
Avoid letting lifestyle inflation damage your future financial security
As your income increases and you sign new contracts, it can be tempting to upgrade every aspect of your lifestyle, such as buying new cars and taking expensive holidays.
Clearly, making the most of the rewards of hard work is important. But, continually increasing your spending, often referred to as “lifestyle inflation”, can mean you miss opportunities to secure your financial future.
It is important to separate your income from your lifestyle and appreciate that just because your earnings increase, your outgoings should not rise at the same pace.
Instead, you should see each new contract as an opportunity to strengthen your future finances rather than simply increasing your current spending.
Prioritise your emergency fund
While planning for life after rugby is essential, managing your finances during your playing career is just as important.
Professional rugby comes with a level of uncertainty that few other careers can match. A serious injury, loss of form, or your club facing financial challenges can have a significant impact on your income with very little warning.
That is why building an emergency fund should be one of your first financial goals. Having a cash reserve provides a vital financial safety net in the event your circumstances change unexpectedly.
As a general rule, we recommend you aim to hold enough to pay your living expenses for three to six months in an easily accessible savings account.
This will allow you to make career decisions from a position of strength rather than being forced into choices by immediate financial pressure.
Make the most of your wealth during your window
Earning a substantial salary during your playing career is only part of the equation. Making that money work for you is what ultimately builds lasting wealth.
One big advantage you will enjoy is having plenty of time to grow your wealth. When doing this, it is important to develop an effective savings and investment strategy.
Savings accounts are generally intended for money you may need within the next five years, while building an investment portfolio is typically more appropriate for longer periods.
It is important to have a disciplined approach when investing. This should involve having a diversified portfolio and making regular contributions to benefit from compound growth, helping your wealth build steadily over time.
You may also have the opportunity, perhaps through earning a bonus, to make substantial contributions that can help accelerate your wealth creation.
We will work with you to ensure that your strategy reflects your personal goals, time horizon, and attitude to risk. We will also help you take advantage of favourable tax opportunities available through ISAs and pensions.
Manage your attitude towards spending during your window
While it is easy to focus on the present and think only about your next contract and earnings increase, having a long-term perspective is equally important.
Part of this should centre on your attitude towards significant purchases and other major financial decisions. It is useful to think about how these choices could affect your financial position five years from now.
Such a mindset can encourage you to think carefully about your finances and help you distinguish between instant gratification and future rewards.
Invest in yourself to secure a successful career after rugby
One of the most valuable investments you can make during your 10-year window is in your future self.
Your rugby career will only offer a short period to earn at your highest potential. As well as making the most of your earnings during that time, it is equally important to plan for your second career once your playing days are over.
Developing your skills and experience outside the game can significantly enhance your opportunities. Some of the steps you may want to consider include:
- Pursuing a university degree
- Completing vocational training
- Starting to build a business.
In each case, the money and time you invest now can help deliver substantial returns in the future.
Taking these steps while you are still playing not only creates more future career options but also provides you with valuable peace of mind now. It can make the transition into your second career smoother and help you approach your retirement with greater confidence, too.
Get in touch
We can help you make the most of your 10-year window and secure your long-term financial future.
If you would like to talk to us about your own arrangements, please get in touch.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) 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.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.