The bank of £0

As a business, we’ve been investigating the problem of bankruptcy amongst footballers and the statistics are truly shocking. Industry figures show that two in every five footballers file for bankruptcy in the UK – yes, 40% of them go bankrupt. That certainly raised a few eyebrows, so we spent some time looking into how this was possible and speaking to SK Financial CEO and keen football fan, Kunle Olafare about the findings, why they matter and what we can learn.

It didn’t take us long to find statistics that start to paint a clearer picture of what’s going on financially in the world of football. Of those entering the academies aged nine, less than 0.5% will ever make a living from the game, according to Sky News and the Business Insider magazine states that only 180 of the 1.5million players in organised football at any one time will make it to the Premier League, where the big money is. That’s just 0.012% - not great odds by anyone’s reckoning.

As a result, most professional footballers end up earning a few thousand a month, not a few hundred thousand – but still dream of the luxury lifestyle dangled in front of them by the likes of Mbappe, who has a fleet of cars worth half a million pounds on his drive. His Ferrari supercar alone is worth £300,000 and he’s not even 25 years old yet.

Add this to the fact that even if they do make it pro, they may only be able to play until they’re around 35 and then only if they stay injury free – a big if. It’s easy to see then why you have a recipe for financial ruin.

“Lured in by the dream of becoming the next Ronaldo, Messi, Mbappe or Benezema, playing for the best teams and earning more money than you could ever spend, footballers find the reality is very different and the figures just don’t add up,” explains Kunle. “Even if they do earn a decent wage, their careers are very short and it’s easy to see how you can very quickly run out of money – especially if they have enjoyed a few luxuries in life,” he adds.

Editor SKQ

Why should those of us not in the footballing world care about all this?

The answer is simple...while the financial circumstances of many footballers are extreme, they shine a light on the dangers of not managing your money effectively. They demonstrate, that even if you do earn a decent wage, there is no guarantee that this will set you up for life – you have to make your money work for you in the long term.

“We see this as a conversation starter for us all to encourage those just starting out in their careers to sit up and take note,” says Kunle. “To show that a decent pay packet is not always enough and that good financial planning and budgeting (yes, we can hear the collective groan from the younger generation too) is actually more financially rewarding than splashing the cash and believing the money will continue to roll in.”

What’s more, footballing isn’t the only profession where you can be sucked into a high paid job at a young age, only to be spat out a decade or two later either burnt out or no longer needed, with no plan for what to do next. Investment banking springs to mind, but also acting, the start-up world – know anyone who’s dreaming of coming up with the next Unicorn business?

Compound interest and me

So how do you pay for your future? How do you make the most of the money you earn in what could be a short-lived career?

“Ideally, you set up a Player Trust Plan that you cannot touch until you are at least 35 years old and you put half your earnings into it each month. If you manage your money sensibly in this way, you could still leave football or whichever job it is, in around 15 years with a six or even seven figure in your bank, setting you up for the rest of your life. And it’s all thanks to a little talked about financial model called compound interest,” explains Kunle.

Assuming a net annual return of 4% inclusive of fees, let’s take a look at how the figures stack up:

• Assuming an average weekly salary for a Premier League footballer is, £50,000 or £2.6million per annum

• In the Championship, an average salary is c£8,000 per week or £416k pa

• An average salary in League One is c£2,000 per week or £104k pa

• An average salary in League Two is c£1,400 per week or £72,800 pa (Onaverage.UK)

Based on the above salaries and by committing to put 50% of earnings into a trust every year for 15 years, a player could earn the following amounts:

• For a Premier League player, this could be worth £35million

• For a Championship player, £5million

• For a League One player, £1.5million

• For a League Two player, £1million

“If we take a League Two player as an example, their average annual salary is approximately £75k – it’s not unreasonable to expect some more fortunate twenty-somethings to earn this, despite not being a footballer. Being able to show them how they could have over a million pounds in the bank in just fi een years, is surely a pretty enticing option,” hopes Kunle.

“And yes, persuading someone to put aside half their salary is not going to be a walk in the park, but I remember a time when players on a Youth Training Scheme contract earned about forty quid a week and a player that I knew used to save half of what he earned. So it is possible, it’s just a choice thing.”

Taking a closer look at the finances of footballers has proven a real eye opener and we will be spending more time looking at the lessons learned, as well as the ways money in these situations can be better managed. As a business, SK wants to work with those in the footballing industry to help better educate footballers coming up through the ranks about money management to help them avoid making the same mistakes of so many footballers before them. We’re sure we will be working with other industries too, where employees follow a similar path. Watch this space.

Appointing a Trusted Team to run your Trust

Choose professional advisers carefully. Remember the three Cs:

Chemistry

• Are you going to get on with this adviser?

• Do you feel confident that this adviser can represent your best interests?

• Have you checked this adviser out?

Concept

• Does this adviser understand your vision?

• Have you discussed a strategy?

• Agree a timeline (like a contract) for the length of the relationship (three years, five years)

• Hold annual meetings.

• Make sure minutes are taken of each meeting and are agreed before filing

Commercials

• What’s in it for you?

• How do you get paid?

• What’s in it for the advisor?

• How does the advisor get paid?

“Why should those of us not in the footballing world care about all this?

The answer is simple… while the financial circumstances of many footballers are extreme, they shine a light on the dangers of not managing your money effectively. ”