3 out of 5 Premiership Footballers Earning An Average £30,000 per week, go broke within 5 years after retirement.
It’s astonishing to most people that anyone who commands a wage anywhere near £30,000 per week could be so wasteful or Stupid, as to spend it all. But there it is.
There are a number of reasons why this is the case. Putting poor advice, gambling, the belief that the good times will last forever and plain stupidity to one side, the main reason they, and anyone else go bust, is because they spend all their money. It genuinely is that simple.
Rather than labour the obvious, it would be more educational to consider why the successful 2 out of 5 don’t go bust. That answer too is obvious, it’s because they invest (wisely), to create another unearned income to equal or exceed the one they earn by being a professional sports person.
Let’s take a fictional footballer, Christiano Rooney. Christiano is paid £200,000 per week (the actual number is irrelevant). He invests 50%, and blows the other £100,000 per week. After a year, he has a notional £5.2 million saved up. This he places into an investment vehicle paying 10% per year interest (£520,000).
Next year he can continue to spend half his salary and invest the other half, except this time he has that extra £10,000 per week to spend (£520,000 interest on his £5.2 million divided by 52).
Another year passes and he has a further £5.2 million which he invests in a like manner and receives another free, extra £520,000 per year interest/dividend. So, he now has half his £100,000 salary and 2 x £10,000 per week to spend. Plus, he still has 2 x £520,000 invested which doesn’t diminish as he’s only spending the interest/dividend.
The principal here, is that he will eventually get to the position where his investment (unearned income) is sufficient to fund his overheads and any frivolous spending. He never spends the £520,000 he invests each year so that just keeps accumulating. According to Xpro (the ex professional sports peoples charity), 3 out of 5 premiership players who earned on average £30,000 per week don’t do this. That’s why they go broke.
If the same principal is applied to the man on the street (reducing overheads until they are 50% of income and investing the other half, then retirement after 5 to 10 years is possible regardless of the income (dependent upon the interest/growth rate).
Currently I invest 60% of what I earn, with a goal of accruing around £300,000 in 10 years, allowing me to live of the income generated by the lump sum.
If by the age of 55 you aren’t investing hugely in your retirement, then the likelihood is you’ll never be able to afford to retire. It’s just maths.
Don’t spend all you earn. Invest as much as you can so that the return on that investment replaces your salary. Don’t be stupid.