Over a year ago, a very close friend sent me a presentation reportedly prepared by Prudential on personal financial planning. After going through it, I wished I had seen it many years earlier.
In my article I seek to give insights into personal financial planning in general and then specifically for sportspeople. It is largely influenced by the said Prudential presentation which I hereby acknowledge.
As regards sportspeople, my desire to write was influenced by what I witnessed at the funeral of my late in-law relative, the legendary footballer George “Mastermind” Shaya in August 2021.
Definition of personal
According to the said Prudential presentation, financial planning is the process of meeting individual life goals through proper management of one’s finances.
Timelines in financial life
The presentation or model has three life stages, namely:
◆ Up to 20 years — learn
◆ 21-60 — earn
◆ Over 60 years — spend
One’s income is timed or measured against his or her age as explained below.
◆ Up to 25 years — dependant phase
◆ 25- 60 years — accumulation phase
◆ 60-65 years — retirement phase
◆ Over 70-80 years — dependant phase
vary with age
People of different age groups have varying financial requirements as explained hereunder.
Age 20-30 years
Their priorities include a good life, flashy spending, generally leave serious financial decisions for later years. Men of this age are usually fascinated by cars, fashion and other things that go with that.
Age 30-40 years
Priorities include settling down, wedding expenses. One has a spouse and possibly children. Upkeep of children kicks in including school fees. It is also realistic for an average Zimbabwean to be expected to support parents, siblings or even members of the extended family.
At work one will be working on career growth and development and possibly studying and paying fees. Society expects one to address personal development, for example buying or building a first residential property.
Age 40-50 years
For many people some of their children will be spread from pre-school, primary school, high school to college or university. One’s parents will be ageing and in need of financial assistance. Suddenly one becomes aware that investments are lacking or insufficient. Some people panic and attempt to set up some businesses, including farming, to supplement their income. Financial commitments may have increased faster than income. Jobs may be threatened.
Age 50-60 years
This is a point of no return. Retirement will be looming. Old age sickness may visit. Stress may set in when one looks with regret at lost opportunities. Only a few people will have options and the energy to bounce back.
Consequences of poor financial planning
These usually manifest in the following ways:
◆ Low disposable income.
◆ Little or no savings.
◆ No investment income.
◆ Low standard of living.
◆ Early death.
◆ Little or nothing for family to inherit.
Planning one’s financial future
This is easier said than done. Do as I say not as I do! Some of the ways to plan’s financial future include the following:
◆ Understand life’s cycles especially income earning versus expenses.
◆ The golden rule is always to live within your means and save or invest where possible.
◆ Work on budgets and financial models, for example out of a dollar how much is food, how much is seed?
◆ Take out policies insurance or assurance policies.
◆ Basic investment can be in properties for own dwelling or earn rent in future.
◆ Lack of financial planning is normally seen through lack of set financial goals, skewed lifestyle habits, uncontrolled purchasing habits, uncontrolled liking of travel and entertainment, living beyond one’s means or hand to mouth expenditure, resisting financial advice, etc.
◆ Plan for old age.
One’s possible financial status or situation can be classified as below:
◆ Good situation, when expenses are below disposable income.
◆ Financial independence, when expenses are within or below asset (investment) income.
◆ Bad situation, when expenses are equal to salary or income.
◆ Emergency situation, when expenses exceed salary or income.
This part is especially for sportspeople. At the said funeral of George Shaya I had the opportunity to interact with footballers of different generations hence my bias towards soccer players in this article. It was clear that they were in different situations, some dire. I was really touched.
When three Government ministers led by our celebrated and loved swimmer Kirsty Coventry and officials from Dynamos Football Club, ZIFA, Premier Soccer League (PSL) and the Sports and Recreational Commission (SRC) came to pay their last respects there were divergent views.
As the family spokesperson I was privileged to facilitate an open discussion between the yesteryear soccer stars and the ministers. I witnessed diversity. Some former soccer stars were angry with their former clubs, ZIFA and even the Government for allegedly neglecting them.
That may not have been without merit. However, some bystanders opined that sportspeople should save or invest during their hay days. That aside I wish to contribute some ideas.
Does sports reward?
There are views that sports in Zimbabwe does not pay unless one goes regional or international. A sportsperson should therefore carry out due diligence on the sporting activity he/ she wishes to pursue.
Sports people in general are restricted by age. My view is that at ages 30-35 years a sportsperson might be forced to retire. So the model above on Income-Age does not apply to earnings of a sportsperson. What is also unique about sportspeople is that they usually start professional sports, reach their peak and retire when they are still young.
How a sportsperson
can plan own finances
My view is that the following might assist a sportsperson in better managing his or her finances:
◆ Families of sportspersons should assist with financial planning ideas including even consulting professional financial advisors.
◆ Clubs, coaches or managers of athletes should give financial planning advise or have financial planning as part of a sportsperson’s programme. They can hire professional financial advisors.
◆ The Government, the SRC or sports bodies such as ZIFA may come up with guidelines or even requirements on future financial planning for sportspeople.
◆ During their active ages ranging 20-30 or 35 years (lasting 10-15 years) athletes should spend and invest wisely. Male athletes may be tempted to spend on destructive entertainment.
◆ Investments that can be made by sportspeople include a dwelling house, properties to rent or even start a small business.
◆ Sportspeople should plan for life after retirement. For example does one go into sports administration, studies, employment or business?
Everyone needs to plan his or her financial future. Sportspeople have special needs as their income is earned over a very short period when they are still young. Reality is that our working life including sports is limited by age.
Godknows Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA(EBS,UK) is a legal practitioner / conveyancer, chartered accountant, corporate rescue practitioner, and consultant in deal structuring and is an experienced director of companies. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected]